Country-by-Country Reporting Data and Locations of European Banks Activities and Profits Petr Janský Charles University Brno, 9 March 2017 The project has received funding from the European Union s Horizon 2020 research and innovation programme under grant agreement No 727145.
Fair tax or corporate tax avoidance? Corporate income tax revenue loss for Czechia Evidence: 7 extrapolations, 2 re-estimations Source Billion CZK % GDP IMF () 8 0.2 IMF () 45 1.0 UNCTAD () 12 0.3 OECD () (lower) 6 0.1 OECD () (higher) 15 0.3 EPRS () (lower) 15 0.3 EPRS () (higher) 57 1.3 Janský a Cobham (2017) - IMF () 7 0.14 Janský a Palanský (2017) - UNCTAD () 2-3 0.04-0.07 Source: Author, Janský (2016)
Objectives Data Methodology Results Conclusions Structure
Research question and objectives How large is misalignment between (reported) profits and (real) economic activities? Profits in havens, activity elsewhere? Objectives (for this and follow-up research): Test the usefulness of published data with the view to test the effects of policy changes Identify which countries seem to be (tax) havens Enrich the research about revenue losses Decompose the causes of misalignment
Data Companies profits & activities across countries Sources: EU banks country-by-country reporting (CBCR) Global multinationals (Bureau van Dijk s Orbis) US multinationals (Bureau of Economic Analysis)
EU banks CBCR data
EU banks CBCR data
EU banks CBCR data Richard Murphy & TJN 2003, Directive 2013 Murphy (), Jelínková (2016), SOMO (2017) Work in progress, data collection difficult The data as they are as of 31 January 2017 2 years, consistency and quality (e.g. Other ) Banks collected (40 of top 50 + 5 more)
EU banks CBCR data - preliminary Bank Country (headquarters) ranking 2016 ranking Notes about the data HSBC Holdings plc UK 1 1 OK BNP Paribas France 2 2 OK Credit Agricole France 5 3 OK Deutschebank Germany 4 4 OK Barclays UK 3 5 OK Santander Spain 8 6 OK Société Général France 7 7 OK BPCE SA France 9 8 OK Royal Bank of Scotland UK 6 9 OK Lloyds Banking Group plc UK 10 10 OK UBS AG Switzerland 12 11 OK Unicredit Italy 13 12 OK ING Bank The Netherlands 11 13 OK Credit Suisse Switzerland 14 14 OK OK Spain 16 15 OK Crédit Mutuel - CIC France 19 16 OK Intesa Sanpaolo Spa Italy 17 17 OK Rabobank Group The Netherlands 18 18 OK Nordea Bank AB Sweden 15 19 OK Standard Chartered plc UK 21 20 OK Commerzbank AG Germany 20 21 OK DZ Bank AG Germany 24 22 OK Danske Bank Denmark 22 23 OK Cassa Depositi e Prestiti SpA Italy 25 24 No data (government, Italy-centered) ABN AMRO The Netherlands 23 25 OK Caixabank SA Spain 27 26 No data PAO Sberbank Russia 26 27 No data Nationwide Building Society UK 33 28 OK Svenska Handelsbanken AB Sweden 30 29 OK Skandinavska Enskilda Banken AB Sweden 29 30 OK DnB NOR Bank ASA Norway 28 31 OK KBC Bank Belgium 34 32 OK Swedbank AB Sweden 35 33 No data LBBW Germany 31 34 Information only about Turnover and employees Dexia SA Belgium 32 35 Only employees info La Banque Postale France 38 36 No data Bayerische Landesbank Germany 36 37 OK Banco de Sabadell SA Spain 41 38 No data Bankia SA Spain 37 39 OK Erste Group Austria 40 40 OK Raiffeisen Gruppe Switzerland Switzerland 48 41 No data Nykredit Holding A/S Denmark 43 42 No data Norddeutsche Landesbank Girozentrale Germany 39 43 OK Belfius Banque SA Belgium 44 44 OK PAO VTB Bank Russia 42 45 No data Helaba Landesbank Hessen-Thüringen Germany 45 46 OK Banco Popolare Societa Cooperativa + Banco Popolare di Milano Scarl Italy - 47 No data (recently merged) Banca Monte dei Paschi di Siena SpA Italy 46 48 OK Banco Populare Espanol SA Spain 47 49 OK Zürcher Kantonalbank Switzerland 50 50 No data Allied Irish Banks plc Ireland >50 >50 OK NIBC Bank NV Netherlands >50 >50 OK Dekabank Germany >50 >50 OK KfW Germany >50 >50 OK RaIffeisen Bank International Austria >50 >50 OK
Estimating misalignment better align rights to tax with economic activity (OECD 2013: 11). Indicators of misalignment between profits and economic activity (e.g. turnover, employees)
Estimating misalignment What are the shares of all banks for countries? Relative misalignment it = Share of profit it 100 Share of turnover it Real (0-100), havens (above 100)
Preliminary results: European banks The relative misalignment of profit with a number of employees in (% of profits) India Sri Lanka Other Morocco Spain Turkey Bulgaria Hungary Bosna and Hercegovina Serbia Poland Great Britain Romania Russia South Africa Kenya Brazil Malaysia Italy Algeria Colombia Mexico France Uruguay Germany Chile Czech Republic Egypt Switzerland Slovakia Belarus Portugal USA Sweden Argentina The Netherlands Taiwan Peru UAE Belgium Singapore Austria Canada Mauritius Bangladesh China Denmark Monaco Malta Finland South Korea Isle of Man Jersey Australia Norway Channel islands Japan Hong Kong Qatar New Zealand Ireland Luxembourg Cayman Island 0 2,000 4,000 6,000 8,000 10,000 Source: Author s calculations
Preliminary results: European banks The relative misalignment of profit with a number of employees in (% of profits) India Spain Turkey Poland Great Britain Russia South Africa Brazil Italy Mexico France Germany Chile Czech Republic USA Sweden Argentina The Netherlands Belgium Singapore China Denmark Finland Australia Norway Hong Kong Ireland Luxembourg 0 200 400 600 800 Source: Author s calculations
Preliminary results: European banks The relative misalignment of profit with turnover, number of employees in and (% of profits) Great Britain Brazil Spain Italy The Netherlands USA France Germany Denmark Turkey South Africa Sweden Mexico Belgium Singapore Poland Russia Argentina Chile Norway Finland Australia Czech Republic India Hong Kong Luxembourg Ireland China 0 200 400 600 800 mean of RM1tur mean of RM1emp Source: Author s calculations
Preliminary results: European banks The relative misalignment of profit with turnover and a number of employees, averages for and (% of profits) 100 200 300 400 China Hong Kong India Czech Republic Finland Australia Norway Russia Argentina Chile Sweden Belgium Poland South Mexico Africa Singapore Turkey France The Netherlands Denmark Germany Brazil Italy USA Spain Great Britain Ireland Luxembourg 0 0 200 400 600 800 Relative misalignment with employees Profit reported in the country Source: Author s calculations
Preliminary results: European banks The relative misalignment of profit with turnover and a number of employees, averages for and (% of profits) 100 150 200 Russia Poland South Africa Turkey Mexico Czech Republic Chile France Germany Argentina Sweden The Netherlands Belgium Singapore Italy Brazil USA 50 Spain Great Britain 50 100 150 200 Relative misalignment with employees Profit reported in the country Source: Author s calculations
Estimating misalignment How much profit is misaligned? Profit misaligned it = Turnover it Total turnover t Total profit t Profit it Real (negative), aligned (0), havens (positive)
Preliminary results: European banks Misaligned profits, with a number of employees in (million euro) Great Britain India Spain Poland Italy Turkey Brazil France Russia South Africa Mexico Chile Czech Republic Sweden Argentina Germany Singapore Australia Norway Finland Denmark The Netherlands Belgium China USA Ireland Luxembourg Hong Kong -10,000-5,000 0 5,000 10,000 Source: Author s calculations
Preliminary results: European banks Misaligned profits, with a number of employees and turnover in and (million euro) Great Britain Italy India France Poland Spain Brazil Turkey Russia South Africa The Netherlands Mexico Czech Republic Sweden Argentina Chile Germany Australia Singapore Finland Norway Denmark Belgium China Ireland USA Luxembourg Hong Kong -15,000-10,000-5,000 0 5,000 10,000 mean of MA1tur mean of MA1emp Source: Author s calculations
Preliminary results: European banks Misaligned profits, with a number of employees and turnover in and (million euro) -5000 5000 0 Hong Kong Luxembourg China Ireland Czech Belgium India Poland France Mexico Chile Argentina Republic Australia Norway Finland Turkey Russia South Sweden Africa Singapore Denmark The Netherlands Germany Brazil Spain Italy USA -15000-10000 Great Britain -10000-5000 0 5000 10000 Absolute misalignment with employees Profit reported in the country Source: Author s calculations
Results: Global multinationals Source: Cobham and Loretz ()
Results: US multinationals Source: Cobham and Janský ()
Conclusion There are relatively large misalignments Ireland, Luxembourg, also Hong Kong, Singapore (and, with little data, Cayman Islands, Jersey) Long to-do lists for research and policy Bank-level, tax rates, various explanations (profit-shifting, different productivity,...) More and better data, large companies Futher steps (Cobham, Gray, Murphy, 2017)
Country-by-Country Reporting Data and Locations of European Banks Activities and Profits Petr Janský Charles University Brno, 9 March 2017 The project has received funding from the European Union s Horizon 2020 research and innovation programme under grant agreement No 727145.
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Acknowledgements I am thankful to Eliška Jelínková, Jakub Siegl and other students at Charles University for their research assistance with the preparation of the data, on which this paper is based. This presentation has been supported by the Horizon2020 programme of the European Union through the COFFERS-project (727145).
Acknowledgements Some of the research presented is work jointly produced with Alex Cobham, specifically: Cobham, A., & Janský, P. (). Measuring Misalignment: the Location of US Multinationals Economic Activity Versus the Location of their Profits. International Centre for Tax and Development Working Paper, (42).