More Actions Needed to Curb Tax Cheating

Paul Sweeney: The recent stories in the news that there is widespread tax evasion and avoidance by the rich and powerful is hardly new. In my last blog, below, called Good News on Corporate Tax Avoidance, I was optimistic on the role of the OECD BEPs process. 

In spite of the news I still hold that there has been some progress. The  downward spiral of avoidance and evasion is being reversed. Evasion and avoidance is still continuing on an industrial scale in the globalised economy which assists such actions, but things are changing, at last. Tax paid by multinationals and the global rich – the 1%ers – is very low, but the public is less tolerant of it.

But much more can be done. Here is a list of some actions which would help reduce tax avoidance and evasion greatly:

1. The law should insist that the real or “beneficial ownership” of all companies be made public. This is coming in the UK under the Tories, but here Mr Enda Kenny has said it wont be done. Private enterprise means lots of privacy. 
2. The use of unlimited liability companies should be made illegal. They are to be found wherever there is mischief, from the Goodman Group to the Quinn schemes.
3. There should be country by country reporting by all multinationals and of cash tax paid in each state each year (they report to the tax authorities so its no burden on them). 
4. EuroTax should be established as an international European-wide tax investigation centre, well funded, with wide powers of investigation into tax evasion and avoidance by wealthy individuals, companies and criminals. 
5. Enhance the investigative capacity of each member EU state in taxation to ensure that the influence of the Big Four and other accounting firms is minimised. Implement strict rules before senior Revenue and other economic officials can be employed by accounting and legal firms.
6. The European Commission should immediately establish a once-off Commission on European Taxation, of widely representative “wise persons”, to chart the broad evolution of taxation in the Union. 
7. There should be broad overall agreement on the general evolution of a European taxation system to facilitate an effective and social Single Market, while recognising that taxation is a national competency.
8. The introduction of wealth taxes, or at the very least, the undertaking of individual wealth assessments, in all member states would provide a key mechanism for countering evasion and avoidance. If there was a wealth tax in each MS, supervised by EuroTax in conjunction with member state tax authorities - a proportion could be pooled which would provide a European Automatic Stabilisation Fund.
9. Taxation must be coordinated effectively so that tax competition is minimised, particularly within the Union.
10. There must be automatic sharing of bank information (as well as tax information) between states and banks so that tax authorities receive all the information they need to calculate the net wealth of every citizen.
11. The Commission should break-up the Big Four Accounting and legal firms which exert undue influence and almost determine taxation policy in many member states, through their dominance and control of “professional” bodies, departments in universities and other fora, which promote regressive taxation. Their functions, such as auditing taxation and consulting which lead to conflicts of interest should also be broken up.
12. There must be much greater cooperation by states to counter avoidance of income tax and social security by MNCs by basing employees in low tax member states and by the use of (bogus) self-employment schemes and contractors. 
13. The European Commission, with EuroTax, should make it extraordinarily difficult for any Tax Exiles of the 28 member states to even visit the European Union to oversee their businesses unless they are registered for tax in the Union. Citizenship rules must be tightened to ensure compliance by evaders and avoiders.
14. All member states should agree, over time, to broad principles of taxation, to attempt to tax income and wealth in line with these principles under main forms of taxation and to coordinate rather than harmonise the tax system. For example, some states may have no capital gains tax, zero tax on certain activities which others do tax and so on, which encourages tax shopping, but only by the very rich and MNCs.
15. End tax dualism: where income from some sources (eg capital) is taxed at lower rates than other sources. There have been increasing privileges for capital income in contrast to wage income, over recent decades.
16. Tax evasion is theft and much tax avoidance is close to theft. Europe must crack down in every way possible against these financial criminals, and on those who facilitate the billions lost in taxation annually. The day of tolerating evasion by high income earners, drug barons and other criminals, including evading businesses, should be ended. The European Union requires a sound fiscal base in the long term.
17. All governments should crack-down hard on family and other Trusts which facilitate avoidance and all large trusts (such as large companies) should have to publish full accounts, annually.
18. The welcome moves forcing tax havens like Switzerland, Monaco and others to disclose information on European citizens (and USA), the European Commission should move strongly against all tax havens within its geographical area to eliminate any loss of tax revenue from all 28 states. 
19. The moves to deal effectively with shadow banking and private pools of capital must be strengthened.
20. The Financial Transaction Tax should be introduced in all member states as soon as possible.

Paul Sweeney is Chair of TASC’s Economists’ Network.