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Tax Aggression Index review

What do we know about Volkswagen?
• Volkswagen Group (hereinafter, “VW”) is one of the worldwide leaders in automotive
industry and one of the most profitable companies in the world.
• Effective tax rate of VW Group for 2012-2014 amounts to 20% which is significantly
below the industrial average and the German statutory tax rate (30,2%-33%).
• VW financial entities were among those mentioned in the LuxLeaks scandal. The ruling of
2010 was published and reveals how VW uses Luxembourg to minimise taxation of its
financial income.
• VW is currently in the epicentre of the CO2 emission scandal followed by tax evasion
investigation in Germany in respect of the emission taxes.

Tax Aggression Index calculation

Tax Aggression Index
Effective tax rate compared to a
In line with the benchmark = 0
1 benchmark
Below the benchmark = 3
No presence = 0
Presence in low-tax jurisdictions
Present but explained = 1
2 (tax heavens)
Present and not explained = 2
Inconsistencies in official
No inconsistencies = 0
3 information related to taxes
If any = 1
Relevant (tax) news in public
Positive news or no news = 0
4 sources
Negative news = 1

20% which is below the benchmarked

Overall level of tax transparency
(i.e. the level of details on the
tax policies in the annual
5 report)

Tax policies described in details = 0
Tax policies described at high level = 1
Only limited tax info is available = 2
No tax info is available = 3

Limited info is available to explain the low
ETR which is "due to tax losses incurred in
previous periods“ *

From 0 to 10 (10 for very aggressive)

Terrible results for VW

Tax Aggression Index



VW is present in Panama, Singapore,

No inconsistencies were identified
LuxLeaks, CO2 emmission scandal

* Note that VW have been profitable at a global level throughout the last 10 years including the most difficult crisis years of 2008-2009 so there are still many questions on the source of these tax losses

Conclusion: local tax audits are recommendable in the countries where VW subsidiaries
are less profitable than VW globally

VW profitability (before tax) per country
• Overall “Profit before tax / Sales” indicator of VW for the period 2012-2014 amounted
to 7%, while in average it totalled to 4,17% (in countries for which data is available).
Profitability of VW entities in 2012-2014, per country





Other VW countries
• Countries for which no data was available for our analysis: Albania, Brazil, Chile,
Denmark, Hong Kong, Panama, Kazakhstan, South Africa, Switzerland, Taiwan, United
Arab Emirates, other.
• Countries specialising in financial transactions:
• Luxembourg: Profit before tax / Sales = 5981%; Effective tax rate (“ETR”) = 0,02%
• Norway: Profit before tax / Sales = 53,28%; ETR = 27,5%
• Mexico: Profit before tax / Sales = 39,14%, ETR = 40%

Based on our analysis we recommend initiating a local tax audit focused on international
tax structures (in particular, on financial transactions) and transfer pricing in the following
• Block A (no financial info is publicly available)*: Albania, Brazil, Chile, Denmark,
Kazakhstan, South Africa, Taiwan

• Block B (local profitability below 3%): Australia, Bosnia and Herzegovina, Bulgaria,
Colombia, Croatia, France, India, Italy, Japan, Malaysia, Philippines, Portugal, Republic of
Korea, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, Spain, United Kingdom

* Hong-Kong, Panama, Switzerland and United Arab Emirates were excluded from the list since they themselves
could be considered to be offshores / low tax countries

Appendix. Request to local tax authorities
Dear Sirs,
Please find attached the results of our independent tax investigation in respect of global operations of
Volkswagen Group (hereinafter, “VW”).
Our results show that the effective tax rate of VW globally is below industrial averages, it has presence in
offshore jurisdictions (Panama, Singapore and Hong-Kong) and its tax policies are not transparent. Moreover, it
has been involved in several tax scandals recently, including LuxLeaks and CO2 emission scandal.
Based on the above and taking into account that the actual profitability of VW in your country is lower than in
most other countries where VW operates we believe that there could be international tax structures applied by
VW locally (e.g. various intragroup charges or aggressive transfer pricing approaches) which enabled them to
minimise tax paid in your country. It would also be a good idea to focus on the (interest) payments to
Luxembourg (if any).
We recommend initiating a tax audit of local operations of VW and its subsidiaries as soon as possible – to make
sure that this multinational company pays fair share of tax in your country.

Best regards,
TaxFriendly Investigation Team