A growing body of research reveals that Europe—and its affiliated territories—play a central role in enabling global corporate tax avoidance.
According to the 2024 State of Tax Justice report by the Tax Justice Network, an estimated €416 billion ($492 billion) in tax revenue is lost each year due to profit shifting by multinational firms and offshore tax practices by the wealthy.
Topping the list of contributors to this revenue loss is the United Kingdom, alongside its network of Overseas Territories and Crown Dependencies. The report attributes 26% of global tax losses to the UK and its affiliated jurisdictions alone.
Together, Europe and its related territories account for more than 70% of the risk to the global corporate tax base, highlighting the continent’s outsized influence in international tax planning strategies.
Where the loopholes are
The Corporate Tax Haven Index (CTHI), also produced by the Tax Justice Network, assesses how jurisdictions enable multinationals to minimize tax obligations. Jurisdictions are scored based on the scale and aggressiveness of their tax systems in facilitating profit shifting.
At the top of the index are British Overseas Territories, with the British Virgin Islands, Cayman Islands, and Bermuda occupying the first three spots, each scoring over 2,400 points.
Among mainland European jurisdictions, Switzerland stands out with the highest CTHI score (2,279), followed by the Netherlands (1,945), which leads among EU member states. Within the EU’s five largest economies, the UK ranks highest with a score of 894, just ahead of France (883). Germany (590), Spain (557), and Italy (342) follow, with Italy performing best in curbing tax avoidance opportunities.
The scale of impact
The UK and its satellite territories are responsible for one-third of all global corporate tax avoidance risk, while EU countries collectively contribute another third. Just three British Overseas Territories—the British Virgin Islands, Cayman Islands, and Bermuda—account for 19.7% of global tax avoidance risk on their own.
Individually, the UK accounts for 2.1% of the total risk, the same as France. Germany and Spain contribute 1.4% and 1.3% respectively, while Italy is again the most restrained at 0.8%. Switzerland is responsible for 5.3%.
Including all European jurisdictions and their territories, the region’s share of global corporate tax avoidance risk climbs to 72%.
Legal frameworks that enable avoidance
The Haven Score, another key index metric, evaluates how national laws and regulations create opportunities for tax avoidance. In 2024, eight of the UK’s affiliated jurisdictions earned the highest possible Haven Score of 100, while the UK itself scored 59. Switzerland ranks highest in mainland Europe with a score of 89, followed by Ireland and Cyprus, each scoring 79. Portugal, by contrast, scored the lowest at 46.
The financial magnitude of this issue is staggering: in 2021 alone, corporations shifted an estimated €1.2 trillion in profits to low-tax jurisdictions, costing governments around the world €294 billion in lost revenues.
Where the money moves
The Global Scale Weight indicator highlights the share of multinational financial activity conducted through a given jurisdiction. Europe and its territories dominate, accounting for 61% of such activity. The UK and its associated jurisdictions alone hold a 16% share.
Among EU nations, the Netherlands leads with an 11.1% share, followed by Luxembourg (8.8%), the UK (8.3%), Germany (4.2%), and both Switzerland and Ireland at 3.4%. France follows closely at 3.1%.
The gap between rates and reality
Many countries advertise one corporate tax rate but offer much lower effective rates in practice. These discrepancies are tracked through the Lowest Available Corporate Income Tax Rate (LACIT) metric.
In the UK’s eight Overseas Territories and Crown Dependencies, the statutory corporate income tax rate is zero. Meanwhile, stark gaps exist across Europe: Luxembourg’s rate drops from 24.9% to just 0.3%, Switzerland from 19.7% to 2.6%, and Ireland from 12.5% to near zero.
Belgium (25% vs. 3%), Malta (35% vs. 5%), and the Netherlands (25.8% vs. 5%) also show significant differences. In overseas jurisdictions like Aruba and Curaçao, the drop can be from over 20% to zero.
These gaps, combined with permissive legal structures, continue to make Europe and its territories prime hubs for corporate tax planning on a global scale.
