Joint Perspectives on Fair and Sustainable Taxation – Open research seminar Brussels, November 21st 2017
The EU confronts increasing and persistent inequalities in income, wealth and opportunity and between generations, gender and regions. One common underlying factor is deficiencies in fiscal systems. FairTax tries to find answers how fair and sustainable taxation and social policy reforms can increase the economic stability of EU Member States. COFFERS identifies deficiencies and opportunities for upgrading in tax law, tax policy development, tax administration and enforcement.
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On September 7, 2017, Dr. Joras Ferwerda (Utrecht University) chaired a COFFERS-themed panel at the ECPR conference called ‘Fighting Tax Avoidance and Tax Crimes in the European Union’. Other COFFERS-participants were Miroslav Palansky (Charles University Prague), Lukas Hakelberg (University of Bamberg) and Ruth Lynch and Martin Joseph Laheen (both University of Limerick). Each of the four attending COFFERS-partners presented relevant ongoing research on tax evasion. The panel was open to all participants of the ECPR conference and was well attended. Dr. Ainsley Elbra (University of Sydney) acted as outside discussant to give the COFFERS-members feedback from outside the consortium. The ECPR (European Consortium for Political Research) General Conference is the main academic event for political scientists in Europe.
Link to the ‘COFFERS-themed panel’: https://ecpr.eu/Events/PanelDetails.aspx?PanelID=7150&EventID=96
Picture: Miroslav Palansky presenting with Lukas Hakelberg also in the frame.
Petr Janský of Charles University took part in the 73rd Annual Congress of the International Institute of Public Finance (IIPF 2017), held in Tokyo, on August 18-20, 2017. He made two presentations at the congress. In one presentation titled “Estimating the Scale of Profit Shifting and Tax Revenue Losses Related to Foreign Direct Investment”, he presented some recent findings from research with his COFFERS colleague Miroslav Palanský on the tax revenue losses due to tax havens, as well as some other research on the scale of profit shifting. In the other presentation titled “Country-by-Country Reporting Data and Locations of European Banks: Profits Shifted to Tax Havens, Turnover and Employees Elsewhere?”, he presented some preliminary results for banks and profit shifting and discussed the usefulness of the recently published country-by-country reporting data.
In his paper, Lukas shows how the liberalization of the common market facilitated cross-border mergers and transactions between related firms. Policymakers knew this would intensify tax competition among member states. Yet, fundamental disagreement between capital importing and capital exporting countries paired with the unanimity requirement in tax matters kept them from harmonizing their corporate tax rules. As a result of the persisting mismatches between national tax systems and the free movement of capital, tax avoidance is today easier inside the common market than in the rest of the world.
The common consolidated corporate tax base (CCCTB), which the European Commission currently proposes, may provide a remedy to profit shifting inside the EU, if adopted. It foresees the EU-wide introduction of unitary taxation with formulary apportionment. That is, a multinational group’s total profit in the common market is calculated by aggregating the revenues and expenses of its European subsidiaries. As a result, a profit that is shifted from one subsidiary to the other will always be included in the group’s result, no matter in which member state it is recorded. Subsequently, the group’s profit is divided among member states based on sales, local workforce, and fixed assets. Intellectual property and other intangible assets are explicitly excluded. Continue reading “The Friedrich-Ebert-Foundation publishes a policy paper on tax avoidance in the common market by COFFERS researcher Lukas Hakelberg”
Miroslav Palanský from Charles University participated and presented in the conference Public economics for development organized by UNU-WIDER on July 5-6 in Maputo, Mozambique, where he presented recent findings of his joint research with another COFFERS researcher, Petr Janský. The aim of his talk was to present the foreign direct investment-approach to the quantification of corporate profit shifting and some preliminary estimates stemming from the application of that approach to IMF’s global direct investment data, which suggest that developing countries are the ones hurt most by corporate profit shifting practices.
Link to the conference can be found here
The GUE/NGL group in the EU parliament published a report July 5th 2017 by Saila Stausholm of Copenhagen Business School and Richard Murphy of City, University London, entitled ‘The Big Four: a study in opacity’. The report is the first of its kind investigating the structure of the Big Four firms, and finds that while it is difficult to establish precisely how many offices and staff each of the Big Four firms have in each country due to their secrecy, it is clear is that the size of their operations in a jurisdiction is not always proportional to its population or GDP. For example, the Big Four have more staff in Luxembourg in proportion to the size of the local population than in any other country; the Cayman Islands come second in this ranking and Bermuda third, indicating that they are heavily overrepresented in tax havens.
The ownership structure of the Big Four, in which they are legally independent networks despite their global brand and central management organizations, further reduces their regulatory cost and risk by providing a ring-fencing mechanism between their presence in tax havens and elsewhere.
Together, these findings suggests that providing professional services directly related to the secrecy jurisdictions are a big part of the business model for the Big Four. The report suggests ways to increase transparency of these firms and commit them to separate auditing services and tax advice.
The report has attracted the attention of several European newspapers.
Link to the rapport can be found here
Link to artikler can be found below:
On 5 June 2017 Petr Janský of Charles University took part in the Tax Justice Annual Conference, an annual conference of Tax Justice Network at City, University of London. In his presentation titled “Scale of Profit Shifting and Country-by-Country Reporting”, he presented some recent findings from research with his COFFERS colleague Miroslav Palanský on the tax revenue losses due to tax havens, as well as some other research on the scale of profit shifting and the usefulness of the recently published banks’ country-by-country reporting data.
For more information please contact Petr Janský
Leyla Ates’s recently published a country report on Turkey entitled “Assessing BEPS: origins, standards and responses” within the framework of the 71st Congress of IFA which will take place in Brazil later this year (August 27-September 01, 2017). In her report, she identifies a number of specific issues pertaining to Turkey, including the problem of dedicating scare administrative resources to initiates that are not necessarily domestic priorities, even though Turkey is aligned in general policy terms with the BEPS principles.
The International Fiscal Association (IFA) is a leading non-governmental, international non-profit organization devoted to the study of international tax law. All country reports and the report of general reporters are published in Volume 102a, Cahiers de Droit Fiscal International. This volume’s aim is to gain insights from the BEPS project on how to improve the outcomes of future tax cooperation efforts. As well-known base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. To tackle BEPS, the OECD has initiated the BEPS project in 2013.
The online versions of the Cahier is available on the website of IFA’s sister organization, the International Bureau of Fiscal Documentation (IBFD).
Together with his co-author Max Schaub, COFFERS researcher Lukas Hakelberg just published an article in Regulation & Governance on the redistributive impact of the Foreign Account Tax Compliance Act (FATCA) and the multilateral automatic exchange of information (AEI) regime it precipitated.
The authors perform a difference-in-differences analysis comparing banks’ deposit and debt security liabilities to foreign non-banks in tax havens and non-havens before and after the adoption of FATCA in 2010. They find that tax havens on average lost more portfolio investment to the introduction of the AEI than to the 2008 financial crisis. In contrast, portfolio investment in non-havens grew rapidly between 2010 and 2014. This divergence becomes even stronger when including the US in the non-haven group, which suggests that its decision not to reciprocate the AEI has recently afforded the country a competitive advantage in the attraction of hidden capital.
You can access the article here.
Lukas Hakelberg and Thomas Rixen from COFFERS working package 3 at the University of Bamberg wrote an accessible popular science piece on the purported end of tax havens for the social science supplement of the German Bundestag’s weekly newspaper (Aus Politik und Zeitgeschichte).
They show how tax competition and tax havens emerged after governments had removed institutional barriers to international capital mobility but failed to harmonize their tax policies accordingly. By defending their de jure sovereignty in tax policymaking, governments unleashed competitive pressures that still limit their de facto sovereignty in the taxation of capital.
International initiatives towards more cooperation in tax matters have only been successful, where affected interest groups in powerful OECD countries lacked influence on the political process. This explains why we have recently seen progress – brought about by coercive pressure – in the fight against tax evasion by households, but relatively little change in the fight against tax avoidance by multinational firms.
You can read the full piece here (in German).