EU Faces Tough Battle to Curb Tax Avoidance and Evasion - by Christoph Pauly and Christoph Schult

German BASF, the world's largest chemical group, is primarily known for its paints, state-of-the-art plastics and perhaps its natural gas dealings with Russia. The down-to-earth managers at the company's headquarters in Germany's Palatinate region have occasionally criticized the greedy banking sector, but otherwise have quietly gone about their business of generating billions in profits. But innovation isn't the only source of BASF's profitability.

The chemical group, based in Ludwigshafen in southwestern Germany, has a large tax department, whose work consists partly in moving money around between continents. But now the company has discovered a tax haven right at home in Europe.

In addition to a large plant, the company operates the BASF Belgium Coordination Center in Antwerp. Some 160 employees at the center spend a portion of their time searching for legal ways to reduce BASF's tax bill. In 2011, the company paid taxes on its many millions in profits at a rate of only 2.6 percent.

BASF is by far not the only company to take advantage of favorable tax conditions in a neighboring EU country to improve its bottom line. Volkswagen, currently the most profitable company in Germany, was even greedier. In 2012, Belgian subsidiary Volkswagen Group Services paid no taxes at all on profits of €153 million, and in the previous year it raked in €141 million in tax-free profits -- and it was all completely legal.

Again and again, major European multinationals manage to take advantage of loopholes in national tax laws. They outwit the tax authorities in different EU countries by moving around their capital and profits, and not just to faraway tax havens in the Caribbean, but to nearby countries like Belgium, Ireland and the Netherlands.

There has never been a more favorable time for tax reform. Europeans are outraged over several cases of high-profile tax fugitives, including that of FC Bayern President Uli Hoeness in Germany, who stashed away millions in Switzerland, and French actor Gérard Depardieu, who acquired houses in Belgium and Mordovia, as well as Russian citizenship, to avoid paying taxes in France.

Nevertheless, there are strong national forces resisting change, as was evident at a meeting of EU finance ministers last Tuesday. Their goal was to adopt a guideline on the taxation of interest income, but Luxembourg and Austria refused to play along. As a result, tax flight is still possible with the help of anonymous foundations, life insurance policies and other income from capital.

Read more: EU Faces Tough Battle to Curb Tax Avoidance and Evasion - SPIEGEL ONLINE

German BASF continues to invest in Flanders, Belgium

German chemical concern BASF has announced its intention to invest between EUR 150 and 200 million in its subsidiary in Antwerp (Flanders) in 2012. The company board called the site one of the cornerstones of the group.

The lofty words and promised investments are indicative of the confidence BASF’s has in its facilities in Antwerp (Flanders). Wouter De Geest, CEO of BASF Antwerp, explains: “We have a very strong strategic position in the group. BASF Antwerp is more stable than ever. We keep receiving replacement investments, which include modernizations and limited expansions.” In 2012, the group also wants to employ at least 250 extra people – the same amount as last year.

In 2011, BASF Antwerp posted a 15 per cent increase in revenue for FY 2011 2011, bringing total turnover to EUR 7 billion. This makes it the second largest company in the region – after ExxonMobil. BASFs profit in Antwerp grew by no less than 41 per cent last year, totaling EUR 897 million. In Antwerp, BASF has about 50 production units and 3,300 employees.

 EU-Digest

Genetically Modified Food Is Dangerous: Europe in a pickle over GM crops rules - Roddy Thomson

As America chews over a bid to market "Frankenfish" salmon, Europe wants to drop scientific objections to genetically modified (GM) crops in a move even its backers admit leaves a strange taste.

With the GM industry and its opponents each sharpening their legal claws, European nations will debate a proposed rule change on Monday that would allow officials to accelerate authorisations for 15 new transgenic crops while letting those who want to keep them off their territories do so.

The continent is deeply divided on the GM issue, which has crept back up the agenda after Germany's BASF "accidentally" sowed seed from an unauthorized potato in Sweden and a furore in Britain about milk and meat from cloned cattle entering the food chain.

Note EU-Digest: Europe must vote NO to approving Genetically Modified Food and not cave in to the pressures imposed by the powerful Chemical and Food Industry lobby. 
 

For more: Europe in a pickle over GM crops rules