The fiscal and distributional consequences of global tax avoidance and tax evasion
In recent years, a significant body of academic research in taxation has focused on the analysis of global tax evasion and tax avoidance as a source of fiscal and distributional predicament. Novel sources of information, such as the disclosure of leaked documents on hidden wealth (e.g. the Panama papers) and on tax avoidance practices by certain firms and wealthy individuals, as well as, new reporting requirements, have increased public awareness of the potential magnitude of tax revenue losses. In response, researchers have made increasing use of this evidence, generating theoretical and empirical findings on the role of tax havens and of tax avoidance schemes.
In the policy sphere, global efforts to modernise international corporate tax rules have accelerated. Mandated by the G20, the OECD has led discussions to reform the global corporate tax framework, within an Inclusive Framework on Base Erosion and Profit Shifting (BEPS) involving 139 countries. In early July, after years of negotiations, the overwhelming majority of the Inclusive Framework members have reached an agreement on the main elements of Pillar 1 (partial re-allocation of taxing rights) and Pillar 2 (the establishment of a minimum effective taxation of multinationals’ profits), subsequently endorsed by the G20 Finance Ministers on 9 July in Venice. Discussions on the remaining elements are going on, in view of finalising the agreement in the coming months. Other notable international actions in recent years include the automatic exchange of taxpayer information and the disclosure of multinational corporate activities by country of operation. At EU level, the European Commission has taken important steps towards a fairer and more transparent corporate tax system, by adopting a number of measures and making proposals to fight tax fraud and tax evasion. These include the creation of a list of non-cooperative jurisdictions for tax purposes, the adoption and implementation of Anti-Tax Avoidance Directives and Directives on Administrative Cooperation, and the adoption of country-specific recommendations in order to tackle aggressive tax planning and improve the efficiency and fairness of tax systems. Last May, the Commission adopted a Communication on “Business Taxation for the 21st century”, setting out both a long-term vision to provide a fair and sustainable business environment and EU tax system and a tax agenda for the next two years, with targeted measures that promote productive investment and entrepreneurship and ensure effective taxation. This agenda complements the ongoing global discussion on corporate taxation and provides solutions to the most pressing problems for the EU in business taxation today, while also supporting the green and digital transitions. Finally, EU initiatives were complemented in June 2021 by an agreement on the public disclosure of country-by-country operations by multinational companies.
Overall, this conference brings together representatives from international institutions, academics, journalists, and politicians working on tax evasion and tax avoidance. The conference seeks to provide a space to discuss the latest policy developments complemented with the latest research, in order to share opinions on policy proposals and generate novel ideas.
The need to address tax evasion and tax avoidance practices, as well as their distributional consequences, becomes even more important considering the budgetary needs of the ongoing COVID19 pandemic. Member States currently experience large budgetary deficits and elevated debt levels, which will need to be addressed once the world economy returns to normality. Doing so in a way that will not inhibit their post-pandemic recovery, calls for expansion of the tax base and a fairer distribution of the tax burden. Addressing tax evasion and avoidance, as well as, initiating novel forms of taxation can contribute to these objectives. At the European level, new own resources will be needed to finance the resources raised under Next Generation EU. Finally, the recent G7 of Finance Ministers and Central Bank Governors has committed to a global minimum tax of at least 15% on a country by country basis while an agreement was reached at the July meeting of G20 Finance Ministers and Central Bank.
Moreover, the fight against tax evasion and aggressive tax planning is experiencing a new global impetus. 132 countries and jurisdictions, representing more than 90% of global GDP, agreed on the main features of a new framework for international corporate taxation, including a commitment to a global minimum corporate tax rate of multinationals’ profits of at least 15% on a country-by-country basis. The agreement was subsequently endorsed by G20 Finance Ministers at their July meeting. The remaining elements of the framework, including the implementation plan, should be finalised at the next OECD/G20 Inclusive Framework meeting in October 2021.
The agreement paves the way for a fairer global corporate tax system. While policy discussions are proceeding, the research community and civil society are actively participating to the debate on the need to revise the global tax system. The conference represents a key opportunity to promote discussions and exchange of views among academics, policy makers and other key stakeholders, showcasing the contribution of science to key policy discussions and reform proposals.
- The Economic Aspects of Taxation Unit, Directorate General for Taxation and Customs (TAXUD), European Commission
- EUTAX Observatory, independent research laboratory hosted at the Paris School of Economics
- Directorate B, Growth and Innovation, Joint Research Centre, European Commission
- Salvador Barrios (JRC)
- Francesca Campolongo (JRC)
- María T. Álvarez-Martínez (JRC)
- Serena Fatica (JRC)
- Maria Gesualdo (JRC)
- Andreas Thiemann (JRC)
- Andrzej Stasio (JRC)
- Antonio F. Amores (JRC)
- Raffael Speitmann (JRC)
- Gabriel Zucman (EU Tax Observatory)
- Mona Barake (EU Tax Observatory)
- Theresa Neef (EU Tax Observatory)
- Sarah Godar (EU Tax Observatory)
- Panayiotis Nicolaides (EU Tax Observatory)
- Giulia Aliprandi (EU Tax Observatory)
- Ana Xavier (TAXUD)
- Philippe Demougin (TAXUD4)
- Brice Reguimi (TAXUD)
- Emer Traynor (TAXUD)
- Silvana Andreea Enculescu (TAXUD)