French banks posted 'multi-billion euro profits' in tax havens

The report details how, in 2015, top Eurozone banks generated €25 billion in profits in low-tax territories like the Republic of Ireland, Luxembourg, the Cayman Islands and the American state of Delaware.

Despite the massive profits, the banks only conducted 12 percent of their total business and employed 7 percent of their workers in those countries – a clear sign of the “tricks” that banks are willing use to avoid countries with stricter tax regimes, according to Oxfam’s Manon Aubry, one of the report’s authors.

In Europe, banking is now the only sector in which companies must declare country-by-country tax and profit figures, thanks to legislation passed in the wake of the financial crisis. The anti-poverty NGO Oxfam took advantage of the new data to write its report.

France first?

Several of France’s biggest banks figure prominently in the report, including BNP Paribas, Crédit Agricole, Société Générale and BPCE (which owns Banque Populaire and Caisse d’Epargne). French banks declared almost €2 billion in profit in Luxembourg, as much as they reported in Germany and Spain combined, despite the fact that Luxembourg’s population is only 1 percent that of Spain’s.

Some of the most telling figures come from discrepancies between profit and other key economic measures.

“Société Générale, for instance, reported 22 percent of its profits in tax havens,” Oxfam’s Aubry told FRANCE 24, “but only 4 percent of its employee pay was generated there.”

In another example, BNP Paribas declared €134 million of profit in the Cayman Islands in 2015, although it had zero employees there.

However, Servane Costrel, Wealth Management Press Officer for BNP Paribas, said that these figures were “obsolete”.

“Profits earned in the Cayman Islands were taxed in the United States,” Costrel told FRANCE 24 by email. “But this is a non-issue since that figure [of profits in the Cayman Islands] dropped to zero in 2016.”

Costrel also pointed out that BNP Paribas paid 28.8 percent in taxes overall in 2016, and that it no longer operates in any state considered “uncooperative” tax havens by the Organisation for Economic Co-operation and Development.

Of course, banks from Germany, Italy, the Netherlands and the UK also posted huge profits in tax havens. In 2015 the British bank Barclays, for example, declared €557 million before taxes in Luxembourg, a country where it only employed 42 people.

Legal loopholes

Banks break few laws by sheltering their profits in tax havens. This means European countries need to take stronger action against tax dodgers, says Oxfam’s Aubry. She targeted France’s official list of tax havens, which she called “meaningless”.

The French list of nine countries conspicuously leaves out heavyweights Luxembourg, the Cayman Islands and Ireland, all of which appear on lists compiled by financial sites such as Forbes and The Motley Fool. Instead it includes Botswana, Guatemala and the Marshall Islands.

“These are not countries that play an essential role in global tax avoidance,” Aubry said. “They don’t compare to the 0 percent tax rates charged by a place like the Cayman Islands.”

Driving down corporate taxes

Aubry pointed out that tax havens can influence other countries’ tax policies, too. States that want to attract business will lower their own corporate tax in response.

“France is a good example,” Aubry said. “It used to have a 33 percent corporate tax rate. It just agreed to lower it to 28 percent. And almost all the French presidential candidates are proposing to lower it to 25 percent, even [far-left candidate Jean-Luc] Mélenchon.”