How Much Weight Does €1 Trillion Carry? Assessing Data on Tax Planning, Avoidance, and Evasion

The debate on the tax behavior of both multinational companies and governments has been gaining a lot of attention, both in the mainstream media and in academic writing. Also, the political debate on tax policy and tax competition versus fighting tax avoidance and tax evasion has become increasingly prevalent. This article does not focus on this debate itself or what its outcome should be. Rather, it looks at available quantitative and qualitative data used to give weight to the arguments that are put forward in the debate. More specifically, the European Commission has claimed that €1 trillion in tax revenue is lost to tax avoidance and evasion every year in the EU.

It appears that this claim predominantly originates from a single report by Tax Research UK. For this reason, this article will examine the claim made by the European Commission comparing it with available data put forward by a number of academics and international organizations and examining the applied method in the Tax Research UK report and the underlying studies. Thus, I will attempt to determine the validity of available data and determine whether the claim of €1 trillion in lost tax revenue is objective and realistic.