EPSU secretariat and War on Want gave a short introduction on the background of the project, expected outcomes and key EU  initiatives currently in the pipeline such as a common tax on financial transactions, public country by country reporting on tax by multinationals, automatic exchange of information on tax rulings ( between tax administrations), and soon to come the relaunch of a common consolidated corporate tax. All of these demands stem from the mobilisation of trade unions and civil society. The momentum must be maintained to ensure a good outcome of these proposals most of which are strongly opposed by business and financial lobbies.

Bernard Adjei, Deputy General Secretary of Ghana’s civil service union PSWU and member of Tax Justice Africa  gave a presentation on the impact of tax dodging on finances for sustainable development in the Continent and the united response by unions and civil society through  “Stop the bleeding” campaign.

Bernard Adjei explained how $50-60 billion is lost per year in illicit financial flows out of Africa, 60-65% of which is tax avoidance and evasion using legal channels. To give the figure some context, it is estimated that $20 billion a year in extra income would be needed for Africa to ‘catch up’ with more economically developed regions. The strategies employed by multinational companies (MNCs) to avoid paying tax in Africa are markedly similar to those in Europe. Questionable practices like transfer mispricing, where one subsidiary sells commodities cheap to another in a low-tax jurisdiction who then sells it on to the consumer country at a much higher price, are commonplace and are designed to shift profits away from the countries of production or consumption, and thus avoid tax where the real economic activity takes place.  The point was made that the bulk of illicit financial flows out of Africa is based on legal channels.

“Stop the bleeding” campaign is helping building awareness of tax justice by reframing tax as a political issue rather than a purely technical one,  making the links between the lack of resources for public services and development, inadequate resources for tax authorities and the proliferation of tax dodging.  It is  a key issue for all trade unions as tax dodging weakens collective bargaining and puts pressure on already low wages. In the public sector, there has been no pay rise for years now and there is strong concern that the country is returning to IMF-backed structural reforms that seek to further reduce the wage bill.  He highlighted the growing awareness of tax issues amongst trade unionists,  the elaboration of national action plans including allocation of resources to finance  tax policy officers, and the importance of working jointly with NGOs and faith groups to reach out to the population. Commenting on the recently released OECD’s action plan against Base Erosion and Profit Shifting ( BEPS), he said the process lacked accountability and involvement of developing countries whilst the results on country by country reporting ( CBCR) were disappointing as the information will not be public.  In conclusion, it was said, that the campaign will continue also in the broader tax justice framework of  PSI and ITUC. “Tax justice in Africa is what need, not development aid” concluded Mr Adjei.

Daniel Bartossa (PSI) outlined some of the macro-economic and historical circumstances that have led to the current flourishing of tax dodging and the general trend of reduction in corporate profits and the shifting of the tax base from capital to labour. The growth of inequality and erosion of public services is a result of this reduction in corporate taxation. He explained how a dramatic change in the production process has facilitated profit shifting, to such a point that 40-50% of world trade occurs in-company. Governments only act on tax justice when under pressure, this was the case with Merkel and FFT and Cameron and the BEPS project. “Now is the moment as tax is on the political agenda and it must be seized, otherwise trade unionists risk losing a singular opportunity” concluded Daniel Bartossa.

Philippe Lamberts MEP from the European Green Party and Valère Moutarlier, Director at the European Commission Tax Directorate General, shared a panel and discussed (amicable if sometimes bluntly) progress or lack thereof made with the fight against corporate tax evasion at EU level.  

MEP Lamberts, initiator and member of the EP Special Taxe Committee that was established last February to scrutinise tax rulings following the LuxLeaks scandals,  denounced the lack of political will to move forward essential measures against corporate tax avoidance. A key example is the long standing demand for public country by country reporting on tax by multinational companies. There is now an opportunity for EU leaders to  agree by qualified-majority voting to the European Parliament’s addition of obligatory public country-by-country reporting for multinationals to the Shareholders’ Directive, they will probably decide to postpone the proposal and wait for an EC impact assessment.  “ No one could give a single decent argument against making companies publish information about profits, losses and taxes paid, without justifying tax avoidance” said Belgian Green MEP.  Another example is  recently agreed  EC proposal for  Automatic Exchange of Information (AEoI) on Tax Rulings which  has been watered down in two ways. First by  halving the retroactivity to 5 years for passing on information about rulings  and second curtailing Commission’s access to information on tax rulings.  In the same vein,  the outcome of the Council discussion regarding the proposal for a common tax on financial transactions is  likely to have near 0 effect.

Mr Moutarlier, representing the Commission, emphasised that  the Council agreement on AEoI on tax rulings represented progress even if the original proposal was better, the same is  happening  with a common tax on financial transactions. That said, all rulings will be covered and the Commission will receive statistical information regarding number and locations of tax rulings. The automaticity of the information exchange between tax administrations should still be considered a step forwar.   On country-by-country reporting, he said that a consultation has been launched as part of the Commission’s Action Plan for Fair and Efficient Corporate Taxation in June.  He underlined that the Action Plan includes the relaunch of proposals on a Common Consolidated Corporate Tax Base and a public consultation was just launched the day before the meeting on the subject. Mr Moutarlier called on trade unions and civil society to “keep up the pressure in the national capital cities’ on tax justice”, which remains a top priority for the Commission.

Participants raised questions about the consequences of the Council’s diluted directive on AEoI on tax rulings for EC state aids investigations for which  information about tax rulings is necessary, the balance of power between the interest of business and civil society,  a common minimum corporate tax rate of 25% in addition to a common corporate tax base (CCCTB) as called for by EPSU and ETUC, the relevance of maintaining a system of tax rulings when they only serve the purpose of tax avoidance, and the need for EU legal protection of whistle-blowers.

Belgian MEP said that the balance of power was clearly in favour of business and that the little progress made with advancing the tax justice agenda was only due to the mobilisation of civil society and trade unions with EPSU playing a leading role.  The EP special tax committee is currently discussing having a reference to a minimum tax rate ( the PPE argues for a maximum corporate tax rate) in its final set of recommendations.

The Commission said that the legitimacy of tax rulings will be examined  at a later stage. A discussion on convergence of effective tax rates in the context of the royalties/dividends directive has been launched, the question of a common corporate tax rate is clearly a red flag, for now the priority is on agreeing a common tax base. The afternoon consisted of sharing of experiences of the project with unions representing employees in tax administrations and updating on the fight for tax justice in their respective countries.

Representatives of the Swedish union ST underscored the necessity of creating a culture of compliance amongst tax payers and of raising awareness about the link between paying taxes and a well-funded welfare state; it is crucial that tax is fair and that citizens know how it is spent to maintain trust in the tax system.  In Sweden the tax system has  become “a  jungle” with many exemptions allowed. Unlike many other countries, however, the tax administration has not been subject to job cuts which shows that some countries can opt for different policy options. As part of the project, ST had organised a seminar in the Stockholm tax office which brought together trade unionists and other workers in the tax authority. The popularity of this event has made the union keen to offer further training on tax issues.

The project event in Madrid had focussed more on the resources (or lack of) available for tax collection. Spanish colleagues from FSP UGT and FSC CC.OO underlined the high rate of ‘fiscal fraud’ in their country that represents 25% of the GDP and how cuts in tax inspectors during the financial crisis have reduced the money available to fund desperately needed services through taxation. Of particular concern was the introduction of more performance related pay for tax employees, which encourages workers to go after less complicated evasion cases amongst smaller tax payers, and not large-scale tax fraud which, whilst more time consuming, would yield much larger revenues for the public purse. Overall there more awareness on tax justice not the least due to a number of tax scandals and corruption cases in Spain involving high-ranking politicians and address important EU-wide policy options such as a common corporate tax to fight systemic tax dumping in Europe. It was also recommended to look at the gender equality dimension of tax systems.

Austria, another project country, has recently undergone major reforms to its tax system, which have brought in a more progressive tax regime thanks to  trade union mobilisation including through a petition that proved very popular. Whilst the final  package did not include all the changes argued for by the trade unions such as a tax on wealth and a tax on inheritance, it is seen as a positive development. Austria is one of the 11 EU countries that support a Common  Financial Transactions Tax (FTT) no doubt thanks to the particular mobilisation of Austrian trade unions and chamber of labour. Representatives from the Austrian unions hope that, when the details are finalised, the FFT is levied on high speed trading as a key instrument to curb high speed trading and is not just reduced to  a bank tax.  It was also mentioned that similar research as to the EPSU/War on Want et al report on Mc Donald’s tax avoidance strategy has been considered with a view to naming and shaming tax dodging companies in Austria. It was however underlined that of the €8bn uncollected tax in Austria, half could be recovered with more audits of companies and also sending tax payment reminders.

Some of the most concerning news came from the colleagues from PCS, that organises tax inspectors in the UK. They explained how HMRC, the British tax authority, had been told to plan for a 25% budget cut over the next four years. HMRC has already suffered a staff cut of over 20% between 2008 and 2012, the second biggest drop in Europe after Greece, ( see  ‘The Impact of Austerity on Tax Collection : One Year Later and Still Going Backwards’, EPSU report, 2014).

However, PCS has successfully made the case against the false economy of cutting resources on tax collection that generate many times the revenue for Governments. More money will be made available over the next four years for increasing the rate of prosecutions of those evading tax and for improving compliance amongst small and medium enterprises. The participants from PCS also underlined some of the challenges of keeping the best tax experts in the tax authority whilst pay is being squeezed and voiced their worries over the prospect of the number of tax offices around the country. Despite the difficult context, PCS continues to be very active on raising awareness on tax with the organisation of regional learning tours, as par of the project activities,

In Ireland, despite 8 years of austerity, and figures showing one of the lowest share of tax revenues in national GDP,  it remains difficult for unions such as CPSU that organises low-paid employees in civil service,  to make the case for tax and linking up with public services. There has been some development as for instance the phasing out of  the so-called double Irish  in 2017 but the low corporate tax rate will remain  in place. That said, the progressiveness of the income tax has improved. The big debate in Ireland concerns the very unpopular introduction of  flat rate water meter charges. 

Conclusions

This was the last project meeting, but the fight for tax justice goes on. As the panellists made clear, the pressure trade unions and tax justice campaign groups  exert does have an effect. We must make sure our voices are heard now, whilst tax justice is at the top of the political agenda. The following key short-terms actions were agreed

·         To disseminate the resources produced as part of the project to continue raising awareness amongst trade unionists and wider public such as the spoof video produced by War on Want “life without tax”.

·          Pressure needs to be exerted on national governments to get behind country-by-country reporting as a way to make corporate tax transparent.

·         The same goes for the Financial Transaction tax.

·         To continue pressing for  public country by country reporting (CBCR), an EPSU statement, draft of which had been circulated to the meeting participants, will be addressed to EU finance ministers who are currently discussing the possibility to add an amnedmnet on CBCR in draft  shareholders’ rights directive. This will be followed by E.action cards produced by War on Want to maintain the pressure.

·         To engage in more technical work in light of the EC public consultation on a CCCTB (deadline for response is 8 January )  

·         To examine  how the anti-avoidance or anti-abuse clauses  are concretely implemented at national level and how it will dovetail with the new EU anti-avoidance clause recently agreed. 

·         to expose and oppose growing involvement of private companies or even tax advising firms in government tax departments or key decision-making bodies or agencies dealing with tax audits as in the UK or indeed at EU level (e.g. EC-backed tax expert groups).

·         To further engage in broader campaign to reverse the regressive taxation trends in Europe

War on Want’s materials will be available to participants as well as  presentations made at the meeting together with this report and list of participants that will be added to the EPSU tax justice network. The short video interviews of delegates made during the meeting will also be shown at the EPSU executive Committee on 3-4 November .

As emphasised by the speakers, forging alliances within and between trade unions from all sectors and with broader social justice movements is key to successful campaigns. In particular, the case for tax cooperation at EU and international levels  as opposed to tax competition must be made.

This website has been produced with the assistance of the European Union – DCI-NSAED/2011/247. The contents are the sole responsibility of EPSU and War on Want and can in no way be taken to reflect the views of the European Union.