16 Nov ICRICT report: End tax dumping globally
So far we have been writing on this blog mostly about the EU’s own response to the Panama Papers scandal as well as corporate tax dodging as evidenced in the Luxembourg Leaks.
Today our GUE/NGL group has been looking at the problem from a global perspective, hosting the Independent Commission for the Reform of International Corporate Taxation (ICRICT) which was created in 2015 and pulls together a group of eminent experts to look at how to overcome the dire state of international corporate taxation. The Commission is now out with a new report on international tax competition. This work ties in and complements the equally recent Stiglitz/Pieth report on ending corporate secrecy practices – both authors are also ICRICT members.
ICRICT’s key contribution is to shine light on some of the elements that the EU has so far chosen to ignore or even actively block.
For one, the Commission brings the question of the fight against the race to the bottom in international tax rates back to the centre of the discussion. While both the EU and the OECD have focused on tackling so-called base erosion and profit shifting, i.e. tax avoidance, ICRICT brings attention back to the seminal decline in corporate tax rates across the globe as well as to the shift in taxation from capital to labour.
This shift is not only due to the neoliberal policy dominance since the late 1970s, but also to tax havens undercutting more progressive taxation in other jurisdictions with zero or near-zero tax rates, often in a rather transparent way (which is why this problem will not be tackled by the push for more tax transparency). By making taxation more regressive, it exacerbates already skyrocketing inequality and undermines democracy.
Any action in the EU on this issue has been vigorously blocked by a series of member states featuring very low rates or other tax haven practices themselves. And yet, the problem is particularly severe right on our doorstep as profits move freely within the EU’s internal market and can then choose the member state with no safeguards for transfers into a Caribbean or other external tax haven to flow out of the EU entirely untaxed.
Second, in particular work done by ICRICT member Magdalena Sepúlveda stresses the link between tax avoidance and austerity policies. Where governments cut social services and investment under an alleged lack of money, those parts of society that are already most disenfranchised take the hit. The devastating austerity measures put in place following the financial and economic crisis of 2007 bear witness to this. Her past work highlights the particular impact on women who suffer from less and worse child care service provision, for instance.
ICRICT ‘s other proposals – ending secrecy of companies’ special treatment such as through the infamous tax rulings exposed in the LuxLeaks, eliminating harmful tax gifts for corporations such as those provided by patent boxes, and pushing for more citizen involvement in international tax debates – are all echoed by what we have called for as a left group for some time. While the tide has been slowly moving against patent boxes – at least in the European Parliament – our request to make sweetheart tax deals open to public scrutiny was repeatedly voted down by the Conservative, Liberal and Social-Democrat groups.
Finally, ICRICT’s report emphasises – rightly – the need to move away from the OECD as a rich country club on to the UN as a representative forum where countries should debate tax at the highest level on an equal footing in order to put an end to both secrecy and tax competition. This initiative has been recently pushed by the government of Ecuador in the UN General Assembly and by the G77 group of developing countries and China at the 2015 global conference on the financing for development in Addis Ababa. So far, most EU member states are trying to keep the rest out of this discussion, but our group will launch a new parliamentary initiative on this soon, too.