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Hungary is third of tax havens’ biggest victims

Hungary is third of tax havens’ biggest victims

Tax havens cause at least 60 billion EUR tax-deficiency for the members of the European Union (EU). Moreover, according to, Hungary is third on the list of the biggest victims.

Accountancy tricks to reduce tax

A French businessman, Gabriel Zucman did some open data research for Süddeutsche Zeitung (SZ), the German newspaper initiating the Paradise Paper offshore scandal.

Based on his results,

international companies operating in the EU redirect at least 350 billion EUR per year to EU-member tax havens like Belgium, Cyprus, the Netherlands, Luxemburg, Ireland and Malta.

Of course, accountancy tricks help reducing tax burdens.

600 billion EUR profit in tax havens

For example, some German companies redirect their profit to Luxemburg from Germany. Explanation is rather easy since corporation tax is much lower in the grand duchy. Experts say that by such operations approximately 600 billion EUR profit flows from multinational enterprises to countries and special territories regarded as tax havens worldwide. As a result, in case of the 28 member states of EU they lose at least 20% (60 billion EUR) of their corporation tax.

The biggest victim is Germany deprived of at least 17 billion EUR tax income. Second place goes to France, which could have 25% bigger tax income if it were not for tax havens. Surprisingly, third place belongs to Hungary according to SZ’s list.

Budapest could collect 23% more tax if local companies did not redirect their profits to countries with lower tax rates.

To make matters worse, other countries of the Central-European region are at the bottom of the victims’ list. If there were no tax havens, Romania and the Czech Republic could collect 6%, Slovenia 7%, Croatia 8% and Poland 10% more tax.

What are Paradise Papers?

The so called Paradise Papers consists 13.4 million documents being processed by 96 media companies worldwide. One of them, BBC’s Panorama set forth its results Monday evening. According to their data, Apple started to search for new tax havens in 2013 after the Irish government and authorities began shutting all legal back doors supporting tax-evasion in the country. Of course, explanation is simple:

the American tech giant aimed to preserve somehow its 2-5% tax rate.

As a result, Apple’s legal advisors sent a questionnaire to Appleby Law Firm specialised in offshore countries. By the way, majority of the documents were leaked from Appleby. Apple was particularly interested in tax regulations of countries like Bermuda, the Cayman Islands, the Isle of Man, the British Virgin Islands, Jersey and Guernsey.

Finally, they chose Jersey, where corporation tax is 0% for foreign companies.

Attached to the British crown Jersey is  officially a British Crown Dependency. However, it has wide self-governance, thus, a right to determine its own taxation rules. According to Paradise-documents, Apple was operating in Jersey from the beginning of 2015 for at least one year. As a result, the company paid only 1.65 billion dollars to the budget of foreign governments. This sum equals to a 3.7% tax rate. According to BBC, this is only sixth of the average global tax rate.

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