This report examines the evolution of harmful corporate tax practices in recent years, as well as the development of blacklists intended to identify such practices. First, it shows that harmful tax practices are no longer confined to easily identifiable jurisdictions known for aggressive tax policies. Second, it finds that current blacklists—although they may be linked to potentially effective sanctions—are generally too limited in scope to produce significant economic effects. Finally, the report proposes enhanced criteria for constructing blacklists of harmful tax regimes. In particular, it argues that introducing a quantitative criterion based on effective tax rates is essential to account for the recent evolution of harmful tax competition.

Over the last 10 years, governments have launched major initiatives to reduce international tax evasion. These efforts include the creation of a new form of international cooperation long deemed utopian – an automatic, multilateral exchange of bank information in force since 2017 and applied by more than 100 countries in 2023 – and a landmark international agreement on a global minimum tax for multinational corporations, endorsed by more than 140 countries and territories in 2021.

Yet despite the importance of these developments, little is known about the effects of these new policies. Is global tax evasion falling or rising? Are new issues emerging, and if so, what are they? These questions are of tremendous importance in a context of rising income and wealth inequality, high public debt in the post-Covid-19 context, and large government revenue needs for addressing climate change and for funding health care, education, and public infrastructure.

This report addresses these issues thanks to an unprecedented international research collaboration and major data improvements. Prepared by the staff of the EU Tax Observatory – a research laboratory created in 2021 with unique expertise on international tax issues – this report summarizes work conducted by more than 100 researchers all over the world, often in partnership with tax administrations. This work leverages the availability of new data on the activities of multinational companies (such as country-by-country reports) and the offshore wealth of households (from the automatic exchange of bank information) created by the policy initiatives of the last decade. This report is the first systematic attempt at taking stock of this informational big bang.

We should make it clear at the outset that we do not restrict this report to the study of tax evasion in a narrow sense of fraud. Nor do we cover all forms of evasion, far from it. Our focus is on the issues that have been the focus of international policymaking over the last decade, the challenges posed by globalization for the taxation of multinational companies and high-net-worth individuals. Some of the practices we cover are clearly illegal – such as failing to report income earned on offshore bank accounts. Others are in a legal grey zone between avoidance and evasion – such as shifting profit to shell companies with no economic substance. Others are clearly legal, such as moving abroad to benefit from special tax regimes designed to attract wealthy individuals. All, however, allow the economic actors who have most benefited from globalization to reduce their tax rates to even lower levels, reducing government revenue, and increasing inequality. What is at stake in all cases is the question of the social sustainability of globalization and of modern tax systems.

We uncover positive evolution worth celebrating, but also setbacks, and major issues that remain unaddressed.

• First, offshore tax evasion by wealthy individuals has shrunk. Thanks to the automatic exchange of bank information, we estimate that offshore tax evasion has declined by a factor of about three over the last 10 years. This success shows that rapid progress can be made against tax evasion if there is the political will to do so.
• Second, the global minimum tax of 15% on multinationals, which raised high hopes in 2021, has been dramatically weakened. Initially expected to increase global corporate tax revenues by close to 10%, a growing list of loopholes has reduced its expected revenues by a factor of 2 (and by a factor of 3 relative to a comprehensive minimum tax of 20%).
• Third, tax evasion – including grey-zone evasion at the border of legality – is increasingly happening domestically. Global billionaires have effective tax rates equivalent to 0% to 0.5% of their wealth, due to the frequent use of shell companies to avoid income taxation. To date no serious attempt has been made to address this situation, which risks undermining the social acceptability of existing tax systems.

We make six proposals to address the issues identified in this report. A key proposal is to institute a global minimum tax on billionaires, equal to 2% of their wealth. We provide a first estimation of the revenue potential of this measure, showing that it would raise close to $250 billion (from less than 3,000 individuals) annually. A strengthened global minimum tax on multinational companies, free of loopholes, would raise an additional $250 billion per year. To give a sense of the magnitudes involved, recent studies estimate that developing countries need $500 billion annually in additional public revenue to address the challenges of climate change1 – needs that could thus be fully addressed by the two main reforms we propose. All proposals, including potential objections, are thoroughly detailed in Chapter 5.

A key message of this report is that tax evasion is not a law of nature but a policy choice. As interconnected nations we can choose free-for-all policies that allow it to fester, or we can choose coordination to curb it. It is also possible to make major progress through unilateral action, should ambitious global agreements fail.

This report provides an empirical analysis of personal and corporate tax competition in the European Union. We find that tax competition increasingly takes the form of preferential or narrowly targeted tax regimes on top of general rate cuts. We provide a ranking of the most harmful regimes targeting foreign, primarily highincome or high-wealth individuals. We also discuss several options to address these trends.

The evolution of tax competition in the European Union may be summarized as follows. While corporate tax rates are still on a downward trend, the decline of top statutory personal income tax rates has stopped since the financial crisis of 2008–2009. In the meantime, many new preferential regimes have been introduced into the personal income tax systems of member states. Many base-narrowing measures also contribute to lowering corporate tax burdens. By targeting the most mobile parts of the tax base – high-income earners and multinational enterprises – these tax incentives undermine effective revenue collection in the European Union and weaken the horizontal and vertical equity of tax systems.

The most striking trend in EU tax competition is the increase in the number of personal income tax schemes targeting foreign individuals. The number of such regimes has increased from 5 in 1995 to 28 today. A tentative ranking suggests that the most harmful ones are the Italian and Greek high-net-worth individual regimes, Cyprus’ high-income regime and the pension regimes of Cyprus, Greece and Portugal. These regimes exhibit long periods of duration, provide significant tax advantages, specifically target very high-income individuals or do not require any real economic activity in a given member state. At present, preferential regimes apply to over 200,000 beneficiaries. A lower-bound estimation suggests that the total fiscal costs for the European Union amount to EUR 4.5 billion per year. This sum is equivalent e.g. to the annual budget of the entire Erasmus programme.

Member states also apply numerous base-narrowing measures which have the potential to significantly lower the effective tax rate of multinationals. Public financing of corporate research and development has increased in recent decades and has increasingly taken the form of tax incentives. A total of 14 intellectual property regimes in the EU are currently designed to tax income associated with patents, software and similar intangible assets at rates of 15% or less (10% or less in half of these cases). Six countries have adopted regimes of notional interest deduction; the Maltese and Cypriot regimes seem exceptionally generous. Approximately 1,348 unilateral tax rulings concerning multinationals’ tax arrangements were in force in 2019. The implications of these rulings for revenue collection are still unknown to the public.

The trends uncovered by this report may be addressed in several ways, e.g. by reforming the Code of Conduct and transforming it into a binding instrument – and extending its mandate to personal income taxation as well as to non-preferential corporate tax regimes that lead to generally low levels of taxation of multinationals. In the absence of a coordinated approach (which is always the ideal solution), member states might consider unilaterally taxing their expatriates, which, under some conditions, may mitigate the effects of preferential personal income tax regimes. A comprehensive implementation of the global corporate minimum tax agreed in October 2021, with minimal carveouts and limited deductions for research and development, could provide an effective floor for the EU’s race to the bottom in corporate taxation.

This report documents the activity of European banks in tax havens and how this activity has evolved since 2014.

The analysis covers 36 systemic European banks that have been required to publicly report country-by-country data on their activities since 2014. We study the level and evolution of the profits booked by these banks in tax havens over the 2014-2020 period. We also compute their effective tax rates and their tax deficit—defined as the difference between what these banks currently pay in taxes and what they would pay if they were subject to a minimum effective tax rate in each country.

This report estimates the amount of tax revenue that the EU could raise by imposing a minimum tax on the profits of multinational companies.

The study considers several scenarios for the imposition of such a tax — ranging from an international tax agreement to unilateral measures — and a range of rates.