Stiglitz: “Zero tolerance towards secrecy.”

Thanks to the initiative of GUE/NGL, the Nobel laureate and austerity critic Joseph Stiglitz attended today’s meeting of the committee on money laundering, tax avoidance and tax evasion (PANA). The rock star economist presented his new report, co-authored by the Swiss anti-corruption expert Mark Pieth, to the committee. The report is merciless in its critique and unrelenting in its demands. It calls for nothing less than the radical transformation of the current international tax system.

Pieth and Stiglitz both served on the commission installed by the Panamanian government to reform the country’s tax system. However, the experts laid down their mandate when the government would not agree to the unconditional publication of the report. The report presented at the European Parliament is the result of their independent work.

One of the central policy objectives the report demands is the creation of a public register listing the true owners and beneficiaries of letter box companies. This would make it impossible for companies and private individuals to hide their wealth and holdings of assets from tax authorities and the public. It also calls for putting an end to the ongoing tax competition between nations which it labels as “destructive” and responsible for “huge social costs”. The report also stresses the need for global action and cooperation in these matters. Only by working together, nations can put an end to secrecy and drain tax havens. “There can be no places to hide – there has to be zero tolerance towards secrecy”, says Stiglitz.

Although the economist emphasises the need for global action, he simultaneously firmly believes that unilateral action by big players such as the EU and the US can be very effective and thus urges both to take on a leading role in this matter and set a positive example. In their fight against the financing of terrorism both have shown that ending secrecy is technically feasible. The success only hinges on the political willingness of the parties involved.

“Pressure has to be put on non-cooperative states. We have to tell them that if they do not cooperate then our banks won’t be allowed to have your banks as a correspondent – interaction is a privilege, not a right”, says Stiglitz.

Tackling international tax fraud would of course require the EU and the US to first come to terms with their own secrecy jurisdictions, which for example allow companies like Apple to only have a 0.005 per cent tax rate on its EU profits.

“In response to the Panama Papers, the US has lately started to make some changes. It’s not enough but there has been a response from the US Treasury on some aspects of beneficial ownership. I’m not hopeful that this will continue under our new administration – when your President is evader-in-chief it’s hard to have confidence in where we’re going to go. That makes it even more important for Europe to play a leadership role on these issues now”, he continues.

Asked by the GUE/NGL MEP Fabio De Masi (DIE LINKE.), Vice-President of PANA, on how far tax justice could help Europe to overcome its economic problems, Stiglitz replied that these illicit practices do nothing less than putting Europe’s future at risk. “If there is no tax revenue, you lack the resources to make the needed investments”, elaborates the economist. “The 26 per cent growth rate observed in Ireland is proof of the phoniness of the current system. What is reported has nothing to do with actual economic activity”, explains Stiglitz.

“Joe Stiglitz basically confirmed all the elements for a fairer tax system that we have long called for. Starting with zero tolerance for secrecy through comprehensive and public registers for the beneficial owners of companies and trusts as well as a fully-fledged country by country reporting”, comments De Masi after the hearing.

Click here to watch the whole debate.

Follow this link to read GUE/NGL’s press release on the event.