The Tax Policy Debate: a Matter for Society As a Whole FEE Fosters the Debate with Stakeholders
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The Tax Policy Debate: A Matter for Society as a Whole FEE fosters the debate with stakeholders Joseph Stead Ian Young Jeffrey Owens Tetiana Iefymenko Mauricio Lazala Roger Semih Öz Kaiser Heinz Zourek Dieter Kempf Winnie Byanyima Bill Dodwell Gergely Baksay Balázs Csomós Ádám Balog Richard Chadwick Pierre-François Coppens Ronen Palan Miguel Pinto Richard Baron Johanna Hellström Tony Greenham Long version Fabian Zuleeg Achim Truger Porter McConnell April 2015 0 . COGITO This document is part of the Cogito series, a selection of thought-provoking publications by the Federation of European Accountants (FEE). Cogito (i.e., I think) is set up to provide new ideas for the European accountancy profession. With this series we aim to enhance innovation and our contribution to business and society. This publication aims to stimulate debate; the views expressed thus do not reflect the official positions of FEE or any of its 47 member bodies. Foreword by FEE ven by the standards of today’s fast- and looking into what is, in reality, not the future paced world, the speed at which but rather already our present. The change in taxation has become a key topic of public opinion and demands that policymakers, public disquiet has surprised lawmakers, business and professionals currently business, governments, regulators have to face is unprecedented. Civil society has and the accountancy profession. been instrumental in driving this change. This debate will continue. However, thanks to the EMany parties are calling for quick solutions but broad range of contributions we have received, with so many divergent views being aired it is the publication does provide some valuable difficult to achieve a common agreement on the insight into the current and future challenge for best way forward. As one of the contributors to taxation policy in Europe this publication states, the public debate has generated much noise but not a great deal of There are certain common themes that run light. throughout many of the pieces received. It seems that the tax structures and systems used It was for this reason that we decided to embark by many countries are not fit for purpose. There on a project to produce a publication that had are various reasons for this. An emphasis on the aim of bringing together a broad array of taxes on employment, the bedrock of the tax stakeholders’ views, based around the belief system for many developed countries, is seen as that the future of tax policy really is a matter for stifling the growth that is so essential to move society as a whole. We firmly believe that many nations out of their current moribund consensus is impossible unless the views of all economic situation. A move towards taxes on sides of the argument have been heard. It is our “undesirable” behaviour (such as pollution) and hope that this publication can help stimulate unearned income are amongst the solutions debate and facilitate the development of such a suggested. consensus in the future. It is also recognised that given the increased Since the beginning of this project in the spring complexity, mobility and digitalisation of the of 2014, the importance of the debate on tax world economy, it is no longer possible for policy to society as a whole has not diminished nations, whatever their size, to try to deal with by one iota. On the contrary, it is a matter that these issues in isolation. Increased international has grown in importance at a time where many cooperation is seen as the key. To some extent, countries struggle with excessive debt and many we are already seeing the fruits of enhanced of the world’s economies have not yet fully cooperation in the enormous effort that the recovered from the crisis. OECD’s BEPS team are making in trying to design an international tax structure fit for the 21st Our ambition of collecting articles from all of the century and beyond. Yet some contributors do stakeholders has not been entirely achieved. Tax not consider even this level of cooperation to be policy is a sensitive topic and not everyone is satisfactory, pointing out that developing comfortable with the idea of expressing a view nations are underrepresented in the project FEE | The Tax Policy Debate: A Matter for Society as a Whole 3 even though they are often the most badly highlighted as a key weapon in the fight against affected by tax evasion and avoidance and by tax tax evasion and tax avoidance but also a crucial competition between countries. tool for taxpayers to ensure compliance with their taxation obligations. Many contributors believe that increased transparency is part of the solution to the There is a common acceptance that increased current debate. In this context, transparency has use of technology in all areas is essential for the many facets. There has been an increasing move development of a modern tax system. There is towards automatic exchange of information also agreement that the fight against tax evasion between nations, largely driven by the United and fraud is a key priority and essential to the States’ FATCA legislation, in order to combat tax maintenance of public finances. In respect of the evasion. As many national governments have discussion regarding tax avoidance, however, been cutting resources to their tax authorities, there is little agreement. these measures are seen as cost-effective because they have been effectively delegated to Many still believe that if a tax planning method is the private financial sector. The issues arising legal then it is not only legitimate but it may from this approach are highlighted by two even be a duty for business to use it. Certain contributors. national courts hold advisers liable if they don’t advise their clients on the most effective tax Increased transparency, especially in respect of treatment. The taxpayers involved often state country by country reporting of tax information that if governments do not wish such tax by multi-national businesses, is seen by national planning opportunities to be available then they governments and civil society as an important should change their legislation. At the other end measure in combatting tax avoidance. Business of the scale, others call on tax payers to consider is not necessarily hostile to this as long as it social fairness when considering their tax doesn’t result in a competitive disadvantage. planning and highlight the necessity for all There is, however, a considerable expectation taxpayers to make a fair contribution to the gap between civil society (who want such public services from which they benefit. information to be on public record) and the current initiatives (which provide for such As highlighted by several contributors, it has information to only be available to tax long been accepted that taxpayers are entitled authorities). Business is concerned that any to arrange their affairs to reduce their tax publically available information is genuinely liability by legal means. Governments frequently informative in showing whether or not a provide tax payers of all types with specific company’s tax obligations have been met. Given means to do so. Thus, tax planning is legitimate the complexity of tax legislation this is not but the apparently unanswerable question necessarily an easy task. concerns the point at which tax planning crosses the line and appears to be unacceptable. Also discussed is what could be termed “inescapable transparency” i.e. the potential Societal consensus on these matters is not that Big Data has to make it easier for tax helped by the increasingly unclear use of authorities to identify tax evasion and tax terminology and by confusion in the roles of the avoidance through the judicious use of different parties. We therefore found it helpful information technology. In fact, increased to first provide the readers of this publication development of information technology is often with some background, particularly in respect of FEE | The Tax Policy Debate: A Matter for Society as a Whole 4 commonly used terms and how the different parties interact in the tax system. The articles We at FEE hope that this series of articles will be themselves are arranged to highlight the past a useful step to advance this delicate debate. It and current issues, to indicate how individual is however only a first step. As indicated by the countries and international organisations have several articles received from professional tried to deal with these issues and then to accountants, we believe that the accountancy consider different alternatives for the future. profession, employing its technical expertise and real-world experience, is both willing and able to FEE would like to extend our warmest thanks to play a key role in helping all stakeholders all those contributors to our publication. They develop solutions that will be in the public cover a wide variety of topics around the theme interest. (Brussels, April 2015) of tax policy and, as requested, cover issues that the contributors feel strongly about. FEE | The Tax Policy Debate: A Matter for Society as a Whole 5 Clarifying matters – an introduction by FEE Before moving on to the contributors’ articles, has even led to calls to boycott certain we felt that it would be useful to clarify certain businesses on the basis of their tax practices. aspects of the debate that may have become Governments have not escaped this public somewhat obscured in the heat of the recent pressure; several countries have changed long- debate. In the first section we will try to standing tax policies or introduced new taxes to demystify terms such as tax evasion and tax address concerns of their voters and their fellow avoidance, and, in the second section we will governments and to close what are perceived as examine the respective roles and responsibilities loopholes.