Will 2016 be the turning point for corporate tax avoidance?
With €1 trillion lost every year to tax dodgers, will 2016 finally be the year when big business and the wealthy are made to pay their fair share?
2015 was another year that billions of euros were lost to tax evasion and avoidance. This is money that belongs to European citizens and should be going on our public services. Money lost from tax dodging in 2015 is probably around the €1 trillion mark. To get an idea of just how quickly this cash is being lost, take a look at the counter on the NoTaxFraud.eu site. It’s scary.
The €1 trillion figure has become well known and used by politicians of many political stripes in speeches to reassure us that they are doing ‘something’ about tax dodgers.
Yet all over Europe there have been massive cuts to the number of tax inspectors, seriously eroding tax agencies' ability to track down the lost revenue. 56,865 tax inspectors were lost in Europe between 2008 and 2012. And although some countries are starting to recruit again, others are continuing down the dead end of further reducing staff numbers. The UK, which has seen the second biggest drop after Greece, has recently announced plans to close all but a handful of the remaining 160 tax offices, meaning even more job losses.
We know that victories in the struggle for tax justice come when we fight for them, and 2016 could well be the year we turn the tide.
Several key proposals on tax are expected early this year from the European Commission. Not least is the relaunch of the Common Consolidated Corporate Tax Base (CCCTB). Put simply, it is a set of common EU rules for calculating where cross-border companies should pay taxes. The Commission’s expressed aim is for profits to be taxed where value is created. It should discourage profit shifting and reduce double non-taxation, where companies take advantage of tax deductions in several countries with the result of not paying tax on the income in any jurisdiction.
The consultation on the proposal is about to close and soon the real work will begin. The business lobby may try to warp this flagship anti-tax avoidance measure into another mechanism to reduce their tax exposure. The tax justice movement must prevent that from happening.
There is a proposition on the table that could make the opacity on which these mechanisms are based a thing of the past. As complicated as they want to make it sound, country-by-country reporting is so simple you'll wonder why it doesn't happen already. The idea is that multinationals publish key information on profits, turnover and taxes for every country where they operate.
This data, which companies already hold, would allow workers and citizens to see where companies make their money and if they are paying the corresponding taxes. It would not only give tax inspectors the information they need to enforce the rules, but create huge public pressure on multinationals to cough up what they owe. Sign the petition demanding that governments agree this simple measure as a matter of urgency.
Meanwhile in Brussels, enquiries into the tax affairs of some of the world’s most powerful corporations are rumbling on. One of the big victories of 2015 was securing a European Commission investigation into McDonald’s Luxembourg-centred corporate structure, which has reduced its corporate tax bill to virtually nothing. The European Public Service Union was a key part of the coalition that first exposed McDonald’s tax dodging in the Unhappy Meal Report. The investigation will take some time. But the Commission has already ordered FIAT and Starbucks to pay back tax they dodged. Here’s hoping for a similar outcome with McDonald’s.
There’s been a lot of momentum built up over 2015, not least with the sterling work done by the European Parliament’s TAXE committee. Grilling big business, finance ministers and even President Juncker focused the spotlight on tax justice. But more importantly, the committee’s hefty report sets out a comprehensive plan to crack down on corporate tax dodging in the EU, including strong demands for many of the measures listed above.
The obstinacy of some member states in not giving the committee access to key documents, and the evasiveness of many multinationals when faced with tough questions on their tax affairs, have necessitated a second term for the committee. A new committee should continue hold feet to the fire.
Every silver lining has a cloud though. This one may turn out to be the Dutch presidency of the European Council. The country’s finance minister has not exactly covered himself in glory with his intransigent attitude during the Greek debt crisis. David Hollanders is right to point out, in this great piece in Social Europe, the Dutch government’s hypocrisy. Whilst they call on Greece to ‘reform’ its tax system, the Hellenic Republic loses millions in tax through Dutch loopholes.
But awkward council presidencies haven’t been a barrier before. Much of the progress of 2015 was made under the presidency of Luxembourg, not exactly renowned for its progressive stance on tax justice.
2016 could be the year of critical mass for the tax justice movement. The momentum built up since LuxLeaks has pushed the European institutions and national governments to a tipping point. Let’s make sure it means a fairer tax system that works for citizens, workers and their public services, not corporate interests.