BUSINESS NEWS

TAX HAVENS COST THE EUROPEAN COMMUNITY EUR 170 BILLION A YEAR EU Member States lose EUR 170 billion a year due to tax avoidance practices exercised by the wealthiest citizens and multinational corporations operating in the EU. – As the sense of small and large entities facing unequal treatment fuels populism across Europe, we must definitely tackle this problem – said French Minister of Finance Bruno Le Maire at the Polish House in Davos. tech companies (Google, Amazon, Facebook, Apple). France has made a concession to avoid the outbreak of tariff war, postponing the tax payment from April to December 2020. EU companies transfer their profits from the countries of their operations to other EU Member States due to less stringent tax systems.

During the 50 th Global Economic Forum in Davos, findings of a report on EU tax havens, drawn up jointly by the Polish Economic Institute (PIE) and Bank Gospodarstwa Krajowego (BGK), provided grounds for a discussion at the Polish House.

The discussion was attended by Polish Prime Minister Mateusz Morawiecki, French Minister of Finance Bruno Le Maire, and OECD Secretary-General Jose Angel Gurria, with Piotr Arak, Director of the Polish Economic Institute, acting as the moderator.

The countries worst-hit by tax avoidance include Germany (losing 29% of its potential tax revenue, corresponding to EUR 18 billion) and France (24%, i.e. EUR 11 billion).

The losses arising from cross-border tax avoidance within the last seven years clearly reflect the scale of EU tax havens. Their aggregated sum exceed by one-fourth the entire EU budget for 2014-2020 set at EUR 960 billion.

According to Le Maire, whether this problem is solved once and for all depends not only on measures taken by individual EU Member States but also on their concerted effort. The French Government has struck a preliminary deal with the USA regarding a digital tax impacting, inter alia, the U.S. leading As revealed by the PIE and BGK report, the countries which benefit most from this artificial profit shifting process, and are regarded by the European Commission as EU tax havens, include Belgium, Cyprus, the Netherlands, Ireland, Luxembourg and Malta. In 2016, the Polish State Treasury lost 11% of the total CIT revenue (corresponding to approx. PLN 3–4 billion) due to profit transfers abroad.

Legal regulations which are less stringent encourage artificial profit shifting. In addition, such countries act as intermediaries in the process of transferring funds further to traditional tax havens such as the Cayman Islands.

To effectively bring to justice the wealthiest citizens evading taxes, OECD is applying the system of automatic exchange of information for tax purposes covering a hundred countries. This facilitated the processing of reports on 50 million bank accounts where a total of EUR 5 trillion was deposited (which is roughly a third of the value of American economy). This way EUR 102 billion due tax has been recovered. By the end of 2020, OECD is planning to announce its recommendations for modifying international tax law.

Only in the EU, the aforementioned EUR 170 billion of loss per year includes EUR 60 billion on account of profits shifted to tax havens by corporations, EUR 46 billion on account of assets shifted abroad by wealthy citizens, and EUR 64 billion loss on frauds and other unlawful activities related to VAT payments in intra-EU transactions.

The Polish Prime Minister also stressed that the declared VAT gap value in all Member States (EUR 150 billion), or loss on tax evasion by corporation or wealthy citizens (EUR 160 billion), has been nearly equal to the annual EU budget.

The report by PIE and BGK lists suggestions for solving the tax evasion issue. A “black list” of Member States considered to be internal tax havens and a system of sanctions imposed by the European Commission are only a few of the ideas. Setting a minimum CIT rate for the entire EU might also help.

The Polish Economic Institute (PIE) is a public think-tank dealing with economic issues. The research focus of PIE covers predominantly international trade, macroeconomics, energy and digital economy, as well as strategic analyses related to the key areas of Poland’s social and public life. PIE provides analyses and expert opinions for the purpose of delivering the Strategy for Respon sible Development, and disseminating Polish research in the field of economics and social studies across the country and abroad.

Bank Gospodarstwa Krajowego (BGK) is a state development bank whose mission is to support the social and economic development of Poland and the public sector in the fulfilment of its tasks. The Bank is a financial partner actively supporting entrepreneurship and making effective use of development programmes. It is the initiator of, and the participant in, cooperation between business, the public sector, and financial institutions.

Kinnarps – a leading European furniture manufacturer, and Collectomate – a Polish tech start-up, have joined forces to develop a line of smart furniture which makes life easier for office workers and administrators. The joint project solves numerous problems plaguing the crowded offices of rapidly-developing companies. One of the foremost office challenges is the time-consuming handling of official and private deliveries in already overburdened receptions. A fundamental part of the smart furniture offered by Kinnarps and Collectomate is a multi-compartment module accessible via an IoT (Internet of Things) solution – an application which can be used on any mobile device. In a time of rapidly-advancing technology and the changes it brings as regards employee behaviour and expectations, Internet of Things-based solutions have become indispensable in a modern, mobile workplace. In a broader context, combining technology and architecture offers a new perspective on the work environment, one where the needs of users are satisfied better. The next-generation furniture offered by Kinnarps and Collectomate supports flexible models of work, as well as facilitating productivity and creating a friendly work environment. Using a convenient mobile app, users can quickly gain access to their packages and are able to effectively work together with their

co-workers, delivering and receiving mail, documents and deliveries. This innovative solution takes into account how we currently use private things in the workplace, how we store office equipment and work together with other people.

Implementing smart furniture is a step towards an innovative and more productive workplace.

Creating modern workplaces which overcome the challenges of modernity requires interdisciplinary knowledge of technology, design, architecture and psychology. We live in interesting times. It is undoubtedly a perfect moment to look at the work environment from a new perspective and change it to match the reality of the digital revolution.

You can learn more about the smart furniture designed by Kinnarps and Collectomate at www.kinnarps.pl/inteligentne-meble and www.collectomate.io.