Tax Havens
Tackling Tax Flight in the European Union
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The EU, in common with other major economies of the world, loses a significant amount of potential tax revenue every year to tax evasion and tax avoidance. Some EU-wide estimates are as high as 500 billion – 1,000 billion Euros annually. This tax loss takes two major forms 1) domestic and international. Domestic tax losses come about when the taxable funds are not shipped overseas but stay within the country. This form of tax loss is on the decline as the increasingly electronic nature of financial transactions and an economy that is less and less cash oriented make domestic avoidance harder.
At the same time, tax flight, the loss of tax revenues related to cross border flows of funds, has been rising rapidly.
What Europe Needs to Do to Tackle the Triple Crises of Tax, Finance & Climate
Our new paper for the European Parliament highlights how old approaches to international governance are increasingly out of date in the day and age of increasing globalization. We now live in a world that is highly interconnected, is full of externalities and is increasingly fast paced. (Available for download in our publications section)
The ever faster and larger cross-border flows of commerce, people, and information technologies has reduced the idiosyncratic risks by allowing us access to an increasing array of options for example for investments or suppliers. At the same time, the higher degree of interconnectedness that this has brought about means that the risk of system wide failure – the dominoes all falling together - has increased significantly as demonstrated by the recent world wide collapse in cross border finance and trade.
Existing international governance structures to pursue shared global goals and manage externalities were designed at a time when systemic risk, externalities and the pace of change was much slower. These institutions and their approach to global governance now look increasingly out of touch. There is an urgent need to plug this governance gap that grows by the day.
Tackling Tax Havens - Adressing Fiscal Deficits, Financing Development and Stabilizing Finance
Anna Gibson, Research Associate, Re-Define
The German government recently decided to purchase stolen data revealing tax avoiders hiding money in Swiss bank accounts. This is a risky move diplomatically, but, for Germany, the gains from tackling this tax flight appear to outweigh the risks. It is also illustrative of the proliferating efforts by individual governments and the international community to clamp down on tax flight: the loss of tax revenue due to cross border tax evasion or avoidance.
However, the recent spat between Switzerland and Germany is merely the tip of the iceberg; symptomatic of what is one the most serious systemic failures of our time: the lack of intergovernmental cooperation on cross-border financial matters.
Sony Kapoor Interviews on Recovery, Financial Regulation, Taxation, Inequality, Unemployment and Governance
Re-Define Managing Director Sony Kapoor sat down with the Real News Network on one of his visits to Washington DC and gave a series of wide-ranging interviews on the difficulty of getting the right financial regulation, the extreme fragility of the economic recovery, the sheer scale of the problem of rising unemployment and stagnating wages, the problems of collective action faced by institutions and governments and a number of other topical issues including the question of what should be done with institutions such as Goldman Sachs. These can now be accessed in our Audio/Video resource section http://www.re-define.org/audiovideo.
Miles to Go Before the G-20 Sleeps (Published as a Comment Piece on Thursday to coincide with the G-20)
Inappropriate regulations, macroeconomic imbalances and serious gaps in international economic governance helped amplify the financial crisis but will not be addressed adequately by the G-20.
How the current discussion on Tax Havens is missing the point?
The current discussion on tax havens is missing the point - So what do we really need to doThe discussion is generating headlines but precious little in the way of tangible progress. This is a wasted opportunity a this political space is unlikely to open again and as William Buiter has sensibly remarked that it is better to over-regulate and then loosen up than to wait for the financial community to get back up and thwart any real efforts at change.
So what are the problems that Tax Havens contribute to?
- Tax Evasion/Avoidance by OECD country citizens
- Tax Evasion/Avoidance by Developing country citizens
- Tax Evasion/Avoidance by Corporate Entities
- Regulatory Arbitrage
- Money Laundering etc
Of these the discussion on reducing (no one is eliminating bank secrecy) bank secrecy is likely to have a modest impact on Tax evasion by OECD country citizens and not much else. Precious little other change is being discussed.
The first problem is that the issues being discussed for change are bilateral tax information exchange treaties. One quick look and we realize that more than 18,000 of these would need to be negotiated in order for all countries to be covered. This is not only inefficient but is also something that will almost never happen. Developing countries in particular, which lose hundreds of billions every year to capital flight will continue to lose out as tax havens negotiate TIEA’s with select countries which belong to the OECD or G-20.
