Two members of WP1, Professor Anastasia Nesvetailova and professor Ronen Palan, drew on their research on financial engineering as tax avoidance for the COFFERS project (formal deliverables D.1.6 and D.1.7) in their new book, entitled Sabotage: The Hidden Nature of Finance. The two deliverables informed in particular chapters 11, ‘The Bad: Derivatives, Tax Avoidance and Evasion’ and chapter 12, ‘The Crypto: Mining the Money’. The book will be released by Public Affairs in the US in January, 2020 and Penguin, in the UK in March 2020, followed by translation to German and Chinese. Here are the links from the UK publication and the US publication.
A seminar on the use of tax spillover analyses created using the methodology described by Professor Andrew Baker and Professor Richard Murphy of City, University of London in a paper in Global Policy, published in March 2019, was discussed at a seminar at City, University of London on 5 September 2019.
The seminar was attended from members of the academic community from a number of universities; a range of NGOs working in international tax issues including Oxfam, ActionAid and the Tax Justice Network; economic think tanks such as Demos and the Institute for Public Policy Research; the press, including The Financial Times and International Tax Review; and representatives from the OECD and the IMF and World Bank funded Global Initiative for Financial Transparency, based in Washington DC.
The seminar was split into two parts. In the first part the issue of tax spillovers was discussed in general. Tax spillovers are defined as the positive or negative impacts that one part of a tax system has on the effectiveness of another part of the same tax system or the tax system of another jurisdiction. They have achieved much greater attention since the publication of a seminal IMF paper on the issue in 2014. The desirability of undertaking reviews of these impacts and the ways that they might be managed was the focus of this session. It was widely agreed that the issue was worth pursuing because of the significant, and largely unknown or unappraised risk of tax spillovers in many jurisdictions’ tax systems.
A discussion of what might be called the Baker-Murphy approach was the focus of the second part of the seminar. The detailed nature of the qualitative methodology used was discussed: it contrasts with the qualitative approach used by the IMF in 2014. In addition, the ability of the system to generate positive recommendations for change was highlighted: the focus of this system is to assist and empower regulators in the course of their work.
Discussion as to how the methodology might be developed, and most importantly put to use, was lively and encouraging. A number of parties present agreed to cooperate on this issue with Professors Baker and Murphy.
‘A major priority for the French government in hosting the 2019 G7 summit at Biarritz is to combat inequality, both within advanced economies and between countries. But if the G7 are serious about tackling inequality, there is a need to tackle the “race to the bottom” in taxation that affects governments around the world.’ Click here to read the Conversation article by Andrew Baker and Richard Murphy.
Andrew Baker, professor of political economy, University of Sheffield, and Richard Murphy, professor of practice in international political economy, City University, London, call on the G7 to task agencies with carrying out fairer assessments of global tax systems using a new framework. Read more in this article.
In July 2019, following the launch of the Corporate Tax Haven Index in May 2019, the Tax Justice Network offered the Inter-American Center of Tax Administrations (CIAT) two free, online webinars in English and Spanish. The webinars aim to train tax authorities to use the Corporate Tax Haven Index to evaluate and address their exposure to multinational corporate tax abuse. Over 100 officials from the tax administrations of 16 CIAT member countries from the Americas and Africa participated in the webinars, including Angola, Argentina, Bolivia, Brazil, Chile, Mexico, and the United States.
Both our Financial Secrecy Index and the Corporate Tax Haven Index, enable tax authorities, among others, to identify the biggest financial risks their country faces based on the secrecy and tax avoidance provisions; as well as to renegotiate or decide with which countries to establish double tax agreements to prevent lower withholding taxes that have an impact on their country’s tax revenues. For more information see here.
COFFERS researcher Thomas Rixen recently gave input to a piece in SPIEGEL Online on latest developments in International tax policy. The German article can be viewed through the following link: https://www.spiegel.de/wirtschaft/soziales/warum-in-der-steuerpolitik-neue-allianzen-entstehen-a-1263386.html
COFFERS made it to the headlines of the Dutch newspaper Trouw. The new money laundering estimates made by the Utrecht COFFERS team in The Netherlands found it to be €16 billion. This accounts for 2.5% on average of the Dutch GDP in the last few years. “The danger for the Dutch economy is that criminals undermine the legal economy, because they are active in many sectors of the Dutch economy,” Coffers project leader Prof. Dr. Brigitte Unger said. Coffers team member Ass. Prof. Dr. Joras Ferwerda mentioned increasing fraud as the biggest danger.
On S aturday, March 9, 2019, COFFERS project coordinator Prof. Dr. Brigitte Unger was asked to comment by the Dutch newspaper de Volkskrant on the money laundering scandal of Troika Bank. Regarding the alleged wrongdoing of some Dutch banks funneling billions of Euros through Russia using Lithuanian banks, Dr. Unger said, “It is a game of cat and mouse, in which the mice are winning at the moment”.
On March 4 and 5, 2019, COFFERS project leader Brigitte Unger organized a workshop on tax morale and compliance, and welcomed at Utrecht University two well renowned professors in the field of tax evasion, economist James Alm and psychologist Erich Kirchler.
On the first day of this workshop, after an introduction to the project, the topics of tax behavior and tax morale were introduced, and the rationale behind tax evasion and avoidance were discussed. This led to a stimulating debate on the causes that bring people to cheat and on the impact that social networks might have on tax evasion.
On the second day, prof. James Alm from Tulane University and prof. Erich Kirchler from the University of Vienna, gave a public lecture targeting the external factors that influence people’s behavior in paying their taxes.
Prof. Alm focused on the relationship between technology and tax compliance, illustrating the motivations of individuals in deciding not to pay their legally due tax obligations and providing an interesting insight on what cashless societies could mean for the future of tax related matters. Consequently, prof. Kirchler presented the interactions between power and trust of tax authorities, explaining that both factors are fundamental to understand voluntary and enforced tax compliance.
Through this lecture, the cultural as well as normative elements that lead people to pay or avoid taxes were discussed, and the audience was given a deeper understanding on tax evasion and tax compliance.
On December 4 and 5, 2018, COFFERS project coordinator Brigitte Unger organized a workshop to tackle the pressing issue of tax gaps, and managed to invite EUROSTAT, DG TAXUD, and IBDF. During this workshop, “The 4-5 tiers of tax gaps” theory conceived by Richard Murphy was presented and different ways in which his model could be implemented were illustrated. The question of how institutions such as the above mentioned ones could contribute in tackling the problem of tax gaps, and accordingly operationalize this tax gaps theory, was raised. Among other presentations, EUROSTAT shed some light on the portion of GDP that the illicit economy occupies, DG TAXUS provided an insight on the VAT tax gap, and IBDF suggested some potential approaches to measure tax gaps. After two days dedicated to the topic of tax gaps and its implications for COFFERS, Brigitte Unger and Richard Murphy gave a glimpse on what the next steps concerning this compelling issue are, and we will hopefully be able to know more about it soon.