European leaders show signs they are hardening their positions on tax abuses – evasion, the use of offshore centres and information sharing are all on the agenda. But these political noises need to be turned into action, argues Natalia Alonso.
Natalia Alonso is the head of Oxfam’s EU office.
“Tax is the price every citizen and corporation must pay for the public services and goods we all need; whether roads, justice, education, or social and health care. Wherever we live and whatever we expect our governments to provide, there can be no exceptions.
More often than not, it is the wealthiest – those best placed to contribute – who are failing to do so, whether by way of the countless ‘offshore’ bank accounts dramatically exposed last month, by deliberate attempts to manipulate the rules, or simply due to under-resourced tax administrations. In the end, it is the world’s poorest who pay the highest price.
Around one trillion euros are lost to tax evasion and avoidance every year in the European Union; a vast source of revenue that could be used to fund essential services such as schools and hospitals at home and abroad, at a time when massive cuts in public spending are taking their toll and public anger is understandably growing.
With tax issues now firmly back on the agenda of not only the European heads of state and government meeting for their summit later this month, but also the fast-approaching meetings of the G8 and G20, the EU is uniquely placed to assume the global lead. This, however, requires that EU leaders adopt the ‘strong and cohesive stance’ demanded by European Tax Commissioner Algirdas Šemeta. Tomorrow’s (14 May) meeting of finance ministers is an opportunity to do so without further delay.
First of all, we need to know who owns ‘offshore’ companies and bank accounts. Tax evaders must no longer be allowed to hide behind anonymous organisations and escape the reach of tax collectors. Everyone who has a stake in a firm should have their identity openly disclosed on easily accessible public registers, allowing the authorities worldwide to quickly access this information and make tax evasion far more difficult than it is today.
Secondly, governments must begin exchanging tax information on an automatic basis. The spontaneous or ‘on request’ exchange of information is inefficient, requiring the tax authorities to know what it is that they are looking for, before they go looking for it.
Thirdly, the EU must reach a common understanding as to what defines a ‘tax haven’. Equally, by establishing a single and publicly available ‘blacklist’ of these places, those tax havens and companies involved in shady deals can be appropriately sanctioned with automatic, dissuasive and coordinated counter measures. The criteria must be applied objectively and free of political considerations, making it possible to include not only dependencies but EU countries themselves, many of which all too closely match the profile of a tax haven.
Finally, governments need not only the legal means to act, but a strong, well-resourced and capable workforce to take on the tax fraud industry. While tax administrations in the developing world often lack capacity and are in desperate need of support, others much closer to home are struggling to cope with unprecedented cuts in their resources. Indeed, despite their renewed public commitment to the fight against tax evasion, the majority of EU leaders have overseen austerity programmes leading to around 50,000 job cuts in tax administrations between 2007 and 2012, with more to follow, according to the European Federation of Public Service Unions (EPSU).
French President François Hollande and British Prime Minister David Cameron have been making headlines by talking tough on tax havens, while the stance of states traditionally hostile to information exchange show signs of softening. However, without immediate, ambitious and binding actions to strengthen both the legal means and institutional capacity of the EU and developing countries to combat tax evasion and avoidance, a valuable opportunity will have been missed to make their good intentions a reality.”