The promotion of tax evasion has deprived public services of crucial resources at a critical time.
This public financing has been critical for the banking sector in the past 5 years and is now critical for citizens and workers. Lost revenue means less means of financing public services used by citizens and companies alike, and less redistribution towards a fairer and more sustainable society.
Concrete measures need to be implemented now in order to put the spotlight on tax justice across Europe.
The G20 summit shows that solutions exist; there is just a lack of political will in Europe to put them in place. While Europe is still hesitating on how to approach the sensitive issue of tax rulings, the G20 have underlined the need to fight these “harmful tax practices”.
The devil, as ever, is in the detail. What we need now are details.
Administrative cooperation needs to be amplified, allowing the exchange of information to be more effective. By including the disclosure of beneficial ownership and through country by country reporting to understand where these types of activities take place, these would mark important progressive steps.
More investment in human resources is essential to complement this increased exchange of information. Information and evidence is useless without sufficient resources to process and act upon tax findings.
Transparency and simplification should be the key words which are directing policymakers in the field.
Starting with more transparency on tax ruling, Europe then needs to push ahead with legislation on a directive on a common tax base with binding harmonisation at the heart of the proposals. A single tax base will ensure profits are taxed once and redistributed amongst countries hosting the company.
Introducing tax labels is another measure worth looking at.
In a similar way to eco-labels, if a company complies with tax obligations it would display a tax label. Whatever the method, a more open and clearer approach would take us out of the vicious circle of tax loopholes.
Concrete measures are essential to enforcing the good will displayed by the G20 and the EU over the past few days. Tax administrations with real control would be better placed to fulfil their duties.
Sanctions such as tax withholding or making funding and loans conditional on tax transparency should be considered. So should an official blacklist of companies who earn above a certain amount of profit and who fail to comply with new practices.
If nothing is done and the political will is not found, citizens in Europe may well lose the common grounds on which societies are based.
The current societal models are a tough ‘sell’. But encouraging tax evasion while increasing taxes on people and workers is a policy society should never have to buy into.
Fair and sustainable tax models which are open, clear and acceptable will not require any sales tactics.