How We Got Here – A historical perspective on tax fraud and tax evasion

GUE/NGL published a new study today, “How we got here – A historical perspective on tax fraud and tax evasion”, written by MEP Miguel Viegas (PCP), showing that the financial liberalisation that began in the 1980s allowed multinationals to develop and evolve their business models by separating the finance from the production side, and thus facilitating tax fraud, tax evasion and tax avoidance. The study:

• looks into the financial liberalisation which began in the 1980s;
• examines the emergence of multinationals and their business model evolution;
• underlines the crucial role played by tax havens in aggressive fiscal planning.

Commenting on the study and citing the neoliberal crusade by Ronald Reagan and Margaret Thatcher, Viegas said:

“I strongly believe that in order to combat tax evasion and fraud, we must understand the framework of economic and financial liberalisation that began in the 1980s with the emergence of the Washington Consensus.”

As noted by Viegas in this new publication, the current financial globalisation is not only characterised by the use of sophisticated
financial instruments and their circulation worldwide, but also for the elimination of all regulation and supervision.  The argument put forward by Alan Greenspan, Chairman of the US Federal Reserve in the year 2000 after derivatives became exempted from any supervision, was that nothing should hold up innovation in such a lucrative business.

The process of financial liberalisation is also clearly inscribed in the evolution of the European Union, as according to Article 63 of the Treaty on the Functioning of the European Union, “all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited”.

With globalisation and the free movement of capital, as well as a series of legal innovations, companies gradually changed their structure by breaking themselves up into in a constellation of legal entities, producing goods in one place, opening their bank accounts in another and paying their taxes there, or even, in a different location.

Tax havens have played and still play a central role in the process of financial globalisation, since about half of all the investments made by multinational companies originate in tax havens. To quote just a few examples, the Channel Islands (Jersey and Guernsey) have invested more in China than Japan or the USA whilst Mauritius is India’s largest foreign investor.

This study marks the latest in a series of GUE/NGL-commissioned reports looking into tax evasion and tax justice encompassing the role of the Big Four accountancy firms, Common Consolidated Corporate Tax Base (CCCTB), the EU’s Tax Treaties with Developing Countries, the troubling EU-Mercosur trade deal, Apple’s tax dodging and the Panama Papers.


Read more about it here and download it from here.