Yesterday IE University’s School of Politics, Economics, and Global Affairs (Spain) held a presentation of Global Tax Evasion Report prepared by the staff of the EU Tax Observatory “Fighting Global Tax Evasion: What Happened, What Could Happen Now”.
A key message of this report presented by Gabriel Zucman is that tax evasion is not a law of nature but a policy choice. As interconnected nations we can choose free-for-all policies that allow it to fester, or we can choose coordination to curb it. It is also possible to make major progress through unilateral action, should ambitious global agreements fail.
Major results. First, offshore tax evasion by wealthy individuals has shrunk. Thanks to the automatic exchange of bank information, EUTO estimates that offshore tax evasion has declined by a factor of about three over the last 10 years. This success shows that rapid progress can be made against tax evasion if there is the political will to do so. Second, the global minimum tax of 15% on multinationals, which raised high hopes in 2021, has been dramatically weakened. Initially expected to increase global corporate tax revenues by close to 10%, a growing list of loopholes has reduced its expected revenues by a factor of 2 (and by a factor of 3 relative to a comprehensive minimum tax of 20%). Third, tax evasion – including grey-zone evasion at the border of legality – is increasingly happening domestically. Global billionaires have effective tax rates equivalent to 0% to 0.5% of their wealth, due to the frequent use of shell companies to avoid income taxation.
EU Tax Observatory made some proposals to address the issues identified in this report. A key proposal is to institute a global minimum tax on billionaires, equal to 2% of their wealth. They provide a first estimation of the revenue potential of this measure, showing that it would raise close to $250 billion (from less than 3,000 individuals) annually. A strengthened global minimum tax on multinational companies, free of loopholes, would raise an additional $250 billion per year. To give a sense of the magnitudes involved, recent studies estimate that developing countries need $500 billion annually in additional public revenue to address the challenges of climate change… (https://www.taxobservatory.eu//www-site/uploads/2023/10/global_tax_evasion_report_24.pdf).
As IE University visiting professor and representative of Odesa Law School proud to be involved in this event with dialogues of eminent representatives of academia, business, and policy Miguel Almunia, Susana Ruitz, Cristina Enache, Alain Cuenca, Miguel Otero, Gabriel Zucman, Jesus Carson Catalan.
Just to note. Firstly. International legal traditions the UN soft law prefer to use “against” instead of the socially motivated term “fighting”. Because the aim is to prevent, not overcome deviance. Secondly, the goal of proposed ideas of the multilateral convention against international tax evasion will be in certain contradictions with supranational treaties, ie TFEU common freedoms of movement, democracy, equality, and the rule of law (especially the principle of equality).
The concept of subsidiarity in EU Law should also be in contrast with states’ sovereign policies in the field of public law and criminalization. The sphere of universal “crimistrative” laws is not in the consensus. Just look at tax loopholes in different EU countries (i.e., Bekham’s Law in Spain). On the other side who had predicted the development of a supranational EU arrest Warrant at the beginning of the 2000s? Time will show.
Some problems should exist in connection with international flows of capital and the balance in the world taxation we need. The scales are very sensitive.
An example. UA forcible migrants in the EU countries pay approximately 1 billion monthly for different services. The same sum the EU planned to pay UA for its afterwar development. Just in case of universal taxation existence should this Ukrainian money be globally compensated like in tax-free cases or not (VAT tax refund for payment with a bank card issued in the state of nationality)? What should we do with the victims of global tax evading (developing countries, social groups in chain supply)? Who will focus on the questions of global tax justice (the UN International Tax Court), etc?
Nice thoughtful meeting. Thanks, IE provost Manuel Muniz and the IE School of Politics, Economics, and Global Affairs management for this event!