COFFERS Researchers Intervene in Debate on Corporate Tax Reform – Murphy, Seabrooke and Wigan among signatories in letter to Financial Times

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.

COFFERS at OECD/EUI High Level Policy Seminar

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)

COFFERS Researcher in Interview regarding fiscal systems

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.

Panel Discussion in Dublin with COFFERS Research

Professor Sheila Killian

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 researcher co-authors paper for the International Monetary Fund

Saila Stausholm

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.

UN Conference: COFFERS tackling illicit financial flows

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.

Utrecht University team publish WODC report

 

In a joint study with Ecorys, a team from Utrecht University led by Professor Unger have, for the first time estimated the extent of money laundering over time with a gravity model. This research, financed by the Dutch Ministry of Finance, seeks to determine the extent to which money laundering has an undermining effect on the regular economy and the financial system.

The study consists of two parts: the first part examines where criminally earned revenues are placed in the regular economy, the second part estimates the annual amount that is laundered in the Netherlands. The extensive research spanning all variables from 181 countries contains more than 20 million observations and estimates the total amount of global money laundering at 677 billion euros in 2014, or 1.2 percent of the world’s GDP. Of this figure the group estimate 16 billion euros can be attributed to money laundering in the Netherlands.

The team consisting of members of Utrecht University School of Economics; Professor Brigitte Unger, Joras Ferwerda, Alexander van Saase, former USE members Ian Koetsier and  Bojken Gjoleka, members of Ecorys Brigitte Slot and Linette Swart and University of Amsterdam Professor Edward Kleemans also propose several policy and future research recommendations, particularly a differentiated money laundering policy given the increasing prevalence of fraud as a money laundering instrument.

Read the English summary here and the full Dutch report here.

Brigitte Unger Inspires Next Generation of Money Laundering Professionals

 

This week COFFERS project leader Brigitte Unger spoke with European students to inspire the next generation of money laundering professionals.

With Money laundering high up on the European agenda, more and more pupils from high school show interest in COFFERS and money laundering.

Lucky students from Brabant, Netherlands Anne van Poppel and Nina van Helmond visited Utrecht University School of Economics this week to speak to Professor Unger and learn more about the latest developments in money laundering. Whilst university students from Paris-Dauphine University as well as high school students from across the Netherlands also had the opportunity to speak to Professor Unger via Skype. These burgeoning money laundering professionals are now writing their first research pieces on money laundering which may one day lead to an exciting career in combatting fiscal fraud

Through this initiative USE aims to capitalise upon this interest and inspire as well as foster talent that will be critical to the success of anti-money laundering efforts in the future.