Leyla Ates and Burçak Bal Yalçin organized a seminar on the “International Automatic Exchange of Information in Tax Matters in collaboration with the Turkish Capital Markets Association (TCMA) on February 26, 2019. The TCMA is a professional organisation with public institution status that consists of 223 resident and non-resident members of financial institutions. The seminar focused on impediments to Turkish tax administrative cooperation with EU Member States. These have led to Turkey’s current position on the EU ‘grey list’ of non-cooperative tax jurisdictions and among the EU’s Top 15 Financial Secrecy Providers, according to a recent COFFERS study.
On March 6th, the Organisation for Economic Co-operation and Development (OECD) welcomed stakeholder inputs on key questions regarding the substance and design of these future policies, set to shape the global tax regime for years to come. In response, a group of academic political scientists, including several COFFERS researchers, sent a comment letter to the OECD. The comment letter draws on the researchers’ work and the political science literature more broadly to sketch out critical considerations for the international community in meeting the tax challenges of digitalization.
Reform would be little more than additional VAT
© Charlie Bibby/FT
Martin Wolf is right that the world’s corporation tax systems need major reform (“The world needs to change the way it taxes companies”, Opinion, March 7). He is entirely incorrect about the required solution.
Corporation tax has three purposes. One is to protect the income tax base from attack. The second is to tax capital, which by and large it does, making it a rare tax as a result. And third, it is a tax that should be used to apportion taxable benefits to those locations where value is added in the global supply chains that benefit us all.
Mr Wolf misses all these points and proposes a destination-based cash flow tax. This, in effect, is nothing more than an additional VAT in those places with the biggest consumer markets in the world. The consequence is that it will be regressive within a state as the incidence will be highest on those with lowest income, since the tax will be easy to pass on to consumers. It will reapportion taxable income from the world’s poorer regions and states to the richest ones of all. It will, as a result, increase global inequality when the precise opposite is needed.
There is a basis available for global international tax reform. It is to apportion the global profits of companies to states on the basis of where their sales, employment and assets are located. This would deliver global tax justice and coincidentally achieve the other objectives of an effective corporation tax. This is the required direction in which reform must take place.
Professor Richard Murphy,City, University of London
Professor Leonard Seabrooke,Copenhagen Business School
John Christensen,Chair, Tax Justice Network
Professor Prem Sikka,Professor Emeritus, University of Essex
Professor Sol Picciotto,Professor Emeritus, Lancaster University
Professor Andrew Baker,Sheffield University
Paul Monaghan,Director, The Fair Tax Mark
Dr Duncan Wigan,Copenhagen Business School
Nicholas Shaxson,Author, “Treasure Islands”
Robert Palmer,Director, Tax Justice UK
Richard Murphy has just published a complementary blog which suggests several key considerations that must be part of any reform of corporate tax. Read it here.
Thomas Rixen participated in a High Level Policy Seminar on “Taxation Governance in Global Markets: Challenges, Risks and Opportunities” that took place at the OECD on February 18 and 19, 2019 and was organized by Pascal Saint-Amans (Director, OECD, Center of Tax Policy and Administration), Jean Pisani-Ferry and George Papaconstantinou (both European University Institute, Florence)
Petr Janský took part in the European Parliament’s TAX3 committee public hearing on “The evaluation of the Tax Gap”. The video and other documents are available here
In the report “Effective Tax Rates of Multinational Enterprises in the EU” for the Greens/EFA group in the European Parliament our colleague Petr Janský sheds new light on the taxes paid by multinational enterprises. German Süddeutsche Zeitung, Austrian Der Standard, French France 24 or Czech Euro.cz reported about the new research findings.
Sheila Killian leads the COFFERS work package on expert networks and how the way that the professionals that make them up condition the operation and equity of fiscal systems. The work package is based at the University of Limerick. Interviewed at the university, Sheila highlights the significance of professional ethics to COFFERS core concern with making fiscal systems that are not only perceived as equitable but positively address inequalities across Europe. In the interview Professor Killian points to the importance of finding out how accountants and lawyers think about their work and the ethics that attach to it. The full interview is available as a podcast here.
Professor Sheila Killian of UL took part in a public panel discussion moderated by Dr Brian Keegan, Director of Public Policy and Taxation at Chartered Accountants Ireland at Chartered Accountants House, Dublin, on January 31st, 2019. The panel addressed topics of tax and ethics, and Professor Killian drew on the COFFERS work on tax experts and professionals in her contribution. The audience was made up of accountants in practice and in corporate settings as well as stakeholders from education and government. The discussion explored not only the various ethical decision making thought processes involved in tax work, but also the various social, reputational and political influences which can be important factors. The objective was to encourage discussion and create awareness of the importance of an ethical mind-set in the accountancy profession in the context of an increasing consciousness of reputation and trust.
COFFERS doctoral researcher Saila Stausholm (Copenhagen Business School) has published an co-authored IMF Working Paper estimating the revenue implications of a Destination Based Cash Flow Tax (DBCFT) for 80 countries. On a global average, DBCFT revenues under unchanged tax rates would remain similar to the existing corporate income tax (CIT) revenue, but with sizable redistribution of revenue across countries. Countries are more likely to gain revenue if they have trade deficits, are not reliant on the resource sector, and/or—perhaps surprisingly—are developing economies. DBCFT revenues tend to be more volatile than CIT revenues. Moreover, we consider the revenue losses resulting from spillovers in case of unilateral implementation of a DBCFT. Results suggest that these spillover effects are sizeable if the adopting country is large and globally integrated. These spillovers generate strong revenue-based incentives for many—but not all—other countries to follow the DBCFT adoption. Read the full paper here.
Richard Murphy, COFFERS researcher and Professor of Practice in International Political Economy at City University of London, recently presented on tackling Illicit financial Flows at United Nations Economic and Social Commission Western Asia International Conference on Financing Sustainable Development in Beirut. Illicit Financial Flows (IFF) constitute a complex and multifaceted problem that simultaneously works in different areas and levels. Acquiring more and better tax data and improving existing tax gap methodologies is key to solving these problems. The conclusion is that every country should perform a qualitative tax spillover assessment in order to appraise tax risks on a country-by-country basis. On his blog, Richard has published text and slides from his presentation.