European Union countries lose an estimated €59.3 billion in tax revenue each year as multinational companies move profits across borders to reduce their tax bills, according to a new analysis by the Tax Justice Network.
The organisation estimates that around €8 billion of the losses are linked to the United Kingdom and its network of Overseas Territories and Crown Dependencies. This represents 13.6% of the EU’s total estimated losses from corporate profit shifting.
The findings were published alongside the 5 November update of the organisation’s Corporate Tax Haven Index. The country-level figures cover 2022, the latest year for which data are available, and relate to multinational companies rather than individual taxpayers.
Profit shifting occurs when companies record earnings in countries with lower tax rates instead of where their business activities generate the income. This can involve payments between companies belonging to the same corporate group, including interest and royalties, which reduce taxable profits in higher-tax jurisdictions.
The OECD estimates that international tax avoidance schemes cost governments between $100 billion and $240 billion annually, equivalent to 4% to 10% of global corporate income tax revenue. While many arrangements are not illegal, the organisation says they undermine the fairness of tax systems.
France and Germany record the largest losses
France faces the highest estimated annual loss among EU members, at €13.1 billion, followed by Germany with €11.8 billion. Together, the two countries account for €24.9 billion, or 42% of the bloc’s total.
Estimated losses exceed €4 billion in Spain, at €4.8 billion, Poland at €4.7 billion and Belgium at €4.1 billion. Italy loses an estimated €3.6 billion, the Netherlands €3.5 billion and Luxembourg €3.2 billion.
Ireland’s estimated loss stands at €2.2 billion, while Sweden and Austria face losses of €1.6 billion and €1.1 billion respectively.
At the other end of the scale, Lithuania, Malta, Latvia, Estonia and Croatia each record estimated losses below €100 million.
The Tax Justice Network said this was the first time it had calculated the amount of EU tax revenue lost through profit shifting specifically linked to the UK’s network of tax havens.
France accounts for the largest share, with an estimated €2.8 billion, or 21.3% of its total losses, connected to the network. Germany follows with €1.4 billion, while Luxembourg faces losses of €570 million.
UK network accounts for a third of global risk
The index ranks jurisdictions according to the extent to which their tax systems and financial activities facilitate corporate tax avoidance. The British Virgin Islands, Cayman Islands and Bermuda occupy the top three positions, while Jersey ranks eighth and the UK 19th.
Together, the UK and six associated jurisdictions account for 31% of the global corporate tax abuse risk measured by the index. Including four additional British Overseas Territories raises the share to 33.3%.
The UK is also among the countries losing substantial revenue to international profit shifting. The organisation estimates that it loses £12.8 billion annually, based on an average for 2018 to 2022.
Moran Harari, the Tax Justice Network’s index lead, said the findings demonstrated the UK’s significant role in global corporate tax abuse risks. The organisation called for stronger international rules and greater disclosure by companies to help tax authorities identify profit shifting.
