by Claudine Gaidoni / Attac Ireland – 27/June/2015
It is in the context of the Luxembourg Leaks, and on the background of street protests by Australian nurses demanding a Robin Hood Tax to help the Australian Health Service, that the G20 held its annual summit in Brisbane in November 2014.
The Robin Hood Tax is of course the popular name of the Financial Transaction Tax in English speaking countries, and in France too, where it is known as “La Taxe Robin des Bois.”
The issue of tax dominated the G20 Summit.
Jean Claude Juncker, recently elected President of the EU Commission, had been minister for Finance and then Prime Minister of Luxembourg during the period covered by the Luxembourg Leaks. Questioned by the press, he argued that tax evasion arose because of discrepancies between national tax legislations, which is a very valid point.
The G20 communiqué at the end of the Summit announced its support for an ambitious programme of tax reforms proposed by the OECD, but stressed that a co-ordinated effort was needed by all governments.
In Europe, there have been some very positive moves.
Luxembourg was particularly under pressure. In January, it ended its long practise of bank secrecy. Also in January, the EU forced companies to pay sales tax in each country in which customers made digital purchases, which was a blow to Luxembourg where a 3% sales tax had attracted a huge e.commerce business.
In a move more directly linked to the LuxLeaks revelations, EU Commissioner for Taxation Pierre Moscovici introduced in March a Tax Transparency Package which aimed to impose an automatic exchange of information on tax rulings and which required national tax authorities to report to each other every three months. Unfortunately, these tax rulings are not required to be made public.
In March, Pierre Moscovici also promised new measures to fight tax avoidance, and on the 17th of June he revealed his Action Plan to fundamentally reform corporate taxation in the EU.
The EU vice-President, Valdis Dombrovskis, was quoted as saying:
“All companies –big or small, global or local – must pay a fair share of tax where real economic activity is taking place and where their profits are actually made. The EU’s internal market needs new rules for corporate tax, to close loopholes and promote real investment into the economy.”
But this ambitious plan still needs to be debated and agreed upon by the 28 nations of the European Union.
In the meantime, individual European countries have introduced their own measures. The UK, for instance, has introduced a Diverted Profits Tax.
In March, David Cameron’s government told the leaders of the Cayman Islands and of the British Virgin Islands that they had until November to reveal the identities of companies’ ultimate owners and to create a central registry.
Outside Europe, the reaction was just as swift.
Australia set up a Senate inquiry into Corporate Tax Avoidance whose terms of reference include, among others, the adequacy of Australia’s taxation laws and suggestions for tax reform.
In China, new regulations targeting tax evasion by multinationals took effect on the 18th of March, days after the EU, Britain and Australia announced new policies to fight tax evasion.
Countries are obviously rushing to plug the gaps, but one cannot help feeling that all this is piecemeal, un-co-ordinated. If each country or block of countries adopts its own measures, we shall again have the prospect of loopholes which multinationals and their accountants will be able to exploit. And there will remain the temptation for some countries to continue offering multinationals special advantages in the name of competition.
For instance, the G7 summit on 7-8 June failed to tackle the issue of Illegal Financial Flows and the US in particular is not making progress on the issue.
According to Global Financial Integrity: “While the world moves towards curtailing the abuse of anonymous companies, the US remains one of the easiest countries in the world in which to launder the proceeds of crime.”
And in the meantime, the saga of tax avoidance by big multinationals also continues to unfold. “The Walmart Web, or how the world’s biggest corporation secretly uses tax havens to dodge taxes” is the title of a report released on 17 June by Americans for Tax Fairness. It reveals that Walmart uses 78 subsidiaries and branches in 15 offshore tax havens to avoid tax. Walmart’s favourite tax haven is Luxembourg, where it has 22 shell companies. It only has one in Ireland. Walmart does not have one single store in either country.
Can there really be an end to tax wars? There could be, and we may be at a crossroads. We believe that the year 2015 opens the possibility of achieving something truly radical in terms of tax justice.
2015 will be marked by three very important events.
In July, the third UN Conference on Financing for Development will take place in Addis Ababa, in Ethiopia.
In September, the UN Sustainable Development Goals post 2015 will be unveiled in New York. Negotiations on this started in January and are facilitated by two countries: Kenya, and Ireland.
The aims of the Sustainable Development Goals are extremely ambitious. In the draft preamble we read:
“This agenda is a plan of action for people, planet and prosperity that also seeks to strengthen universal peace in larger freedom. All countries acting in collaborative partnership will implement the Agenda. We are resolved to free the human race from the tyranny of poverty and want, and to heal and secure our planet for present and future generations. We are determined to take the bold and transformative steps needed to shift the world on to a sustainable path. As we embark on this collective journey, we pledge that no one will be left behind.”
In December, the 21st Conference of the Parties to the UN Framework Convention on Climate Change will take place in Paris.
Achieving the Sustainable Development Goals and confronting climate change are huge challenges. If we want to succeed, we must move away from the world revealed by the Luxembourg Leaks, a world of competition, greed, shady deals, and gains made by one country at the expense of its neighbours. We have no option but to act in collaborative partnership.
A fortnight ago, Oxfam launched an online petition to put pressure on our Taoiseach to attend the UN Conference on Financing for Development in Addis Ababa and to seize that opportunity to tackle unfair tax rules.
Specifically, it called on Enda Kenny “to go and commit to the creation of a world tax body to ensure all countries have a say in creating fair tax rules.
This is a call which this conference wishes to echo.
We need a world tax body to ensure that all countries have a say in creating fair tax rules because clubs of rich countries, like the OECD or the European Union, cannot go on setting up the rules by which the rest of the world will have to play.
And in light of the LuxLeaks revelations, we specifically need three things:
We need the introduction public country by country reporting for all multinational corporations- a requirement that would oblige companies to report on the full spectrum of their activities in each of the countries in which they operate.
We need the introduction of an automatic exchange of tax information between states, with the option of non-reciprocal information exchange for developing countries, to allow them the benefit of accessing information without having an obligation to reciprocate, until they reach the necessary level of capacity.
And we need enhanced transparency around the ownership of companies, and the introduction of a public register to hold the names of the real beneficial owners of companies.
But we need even more.
The Sustainable Development Goals will require an estimated 2.5 trillion Euro per annum in new financial resources in developing countries, while actions to adapt to and to mitigate climate change are likely to cost hundreds of billions of dollars.
Overseas Development Aid is already not sufficient as few of the developed countries are able to meet the commitment they made in 1970 to provide 0.7% of their Gross National Income in aid. We need new, innovative sources of financing. Attac, and all the organisations in Ireland who campaign for a Financial Transaction Tax, believe that an FTT can make a huge contribution.
Many countries, including Ireland, understand the fund raising potential of Financial Transaction Taxes and have already introduced some form of FTT. But under the influence of powerful financial lobbies, they have been timid in their efforts, taxing only certain transactions and introducing loopholes which further diminish the tax take.
On the FTT, Europe had tried to take the lead. In September 2011, the European Commission had published a detailed proposal for a tax on financial transactions, but member states were unable to reach an agreement on how this new tax should be implemented. As a result, eleven countries entered an enhanced cooperation mechanism and decided to proceed on their own.
These countries are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. But they have been moving very slowly, seemingly unable to decide what transactions to cover and at what rate, with individual countries seeking to win exemptions for assets that would hit their financial sectors particularly hard.
While not opposed in principle to a Financial Transaction Tax, Ireland has refused to join that group. A letter sent by the Department of Finance to Claiming Our Future on the 27th of March stated:
“Ireland’s position is that an FTT would be best applied on a wide international basis to include the major financial centres. If it cannot be introduced on a global basis, it would be better if it were introduced at least on an EU-wide basis to prevent any distortion of activity within the Union. This is in line with the Commission’s desire that the tax should be applied on a global basis. Such an approach would avoid the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions.”
And so, here is our last ask to Enda Kenny: that, in Addis Ababa, in line with the wishes of the European Commission and the wishes of his own Department of Finance, he advocates the introduction of a Financial Transaction Tax on a global basis. And because the needs are so great, it must be a truly ambitious tax, with a broad tax base which must include currency transactions.
The currency market is the largest market in the world. According to the Bank of International Settlements, trading in the Foreign Exchange markets averaged 5.3 trillion dollars per day in April 2013. At least three quarters of this was speculative in nature. The currency market is loosely regulated, and highly concentrated. Most of the trading is carried out by about 30 large banks, trading mostly in London, New York, Singapore, Tokyo and Hong-Kong.
In May 2015, the top ten currency traders were:
Hold on, is this the right list, or did we mix it up with the list of those criminal banks which have been exposed for rigging exchange rates, manipulating commodity prices or sheltering the proceeds of tax evasion, corruption, money laundering by drug cartels or terrorist organisations? Strangely, they turn out to be the very same ones! Truly, something is rotten in the state of finance.
Currency transactions must be taxed too!
A broad based Financial Transaction Tax will not only raise considerable funds. It will discourage short term trading and speculation and it will, instead, encourage long term investment. It will bring stability to the financial system and it will be good for business. It is an essential tool for the achievement of the Sustainable Development Goals.