THE ROOTCAUSE OF TAX PAYMENTS OPTIMIZATION IN THE EU

There are sharp differences in corporate tax rates and incentives in Europe to optimize tax payments and in the process boost profits. The European Union is a single market, which means that companies can incorporate anywhere and sell their goods and sefvices across the continent, but because there is no harmonised tax system, it's a playground for smart accountants and tax specialists who know how to exploit the differences.

There's not a great deal that governments can do to root out the pratice. The key here is what's known as transfer pricing, which is accountant-speak for determining which revnues and profits should be recognized in which parts of a multinational company with affiliates in numerous countries.

Over the past decade, international rules that govern transfer pricing and tax loopholes have been tightened under the auspices of the Organisation of Economic Co-operation and Development (OECD), which in particular has put growing pressure on tax havens. The OECD is now trying to take its work a step further with an initiative called base erosion and profit shifting. But as it acknowledges, "domestic rules for international taxation and internationally agreed standards are still grounded in an economic environment characterized by a lower degree of economic integration across borders, rather than today's environment of global taxpayers, characterized by the increasing importance of intellectual property as a value-driver and by constant developments of information and communication technologies."

In other words, as long as there are free markets, different tax rates in different countries and armies of clever accountants, public shaming may well be the most effective strategy to deal with the problem.

Corporate Tax Rates in the EU Member States

1. Malta: 35.0%
2. Belgium: 33.9%
3. France: 33.3%
4. Italy: 31.4%
5. Spain: 30.0%
6. Germany: 29.5%
7. Greece: 26.0%
8. Austria: 25.0%
9. Portugal: 25.0%
10. Denmark: 24.5%, Finland: 24.5%
11. Slovak Republic: 23.0%, United Kingdom: 23.0%
12. Luxembourg: 22.5%
13. Sweden: 22.0%
14. Estonia: 21.0%
15. Croatia: 20.0%, Netherlands: 20.0%/25.0%
16. Czech Republic: 19.0%, Poland: 19.0%, Hungary: 19.0%
17. Slovenia: 17.0%
18. Romania: 16.0%
19. Latvia: 15.0%, Lithuania: 15.0%
20. Cyprus: 12.5%, Ireland: 12.5%
21. Bulgaria: 10%