European Commission Tax Fairness Conference: Taxing fairly – Taxing global

Today is day 2 of the European Commission Tax Fairness Conference, and the first session was entitled Taxing fairly – Taxing global. The key theme was to discuss how tax policy can ensure that large businesses pay a fair share of tax, when tax is fundamentally a national issue.

The panel consisted of:

• Valère Moutarlier, Director for Direct taxation, DG Taxation and Customs Union, European Commission

• Richard Murphy, Professor of Practice in International Political Economy at City University; Director at Tax Research UK and the Fair Tax Mark

• Jim Clarken, Executive Director of Oxfam Ireland

• Will Morris, Deputy Global Tax Policy Leader, PwC; Chair of the BIAC Tax Committee 

These are some of the key comments from the session.

Valère Moutarlier

The EU fair taxation agenda has a global reach, because EU tax policy is part of global economy and challenged by globalisation. Globalisation creates tensions between tax systems around the world, but also tension in public opinion.

To stabilise the global system, cooperation at a global level between different regulators is vital. The EU has taken a leading role in implementing standards, and also developing our own elements.

The EU focus is on:
 - Responsibility of EU to promote fair taxation globally - Protecting the single market from external impacts

We are strongly engaging behind BEPS, but also support third countries to adopt and have the capacities to implement reforms in their own domestic tax systems. Helping developing countries to secure their tax base is extremely important. But also their participation in the debate is very important.

More can be done on thinking about the impact of our own tax policy on developing countries. What are the possible spill-over impacts?

Protecting the single market involves launching the listing process [EU list of non-cooperative jurisdictions], on which 28 Finance Ministers has engaged. There is a need at a global level to have a level playing field for EU businesses.

These elements will contribute to tackling behaviour that we don’t think are acceptable in taxing at a global level.

We will not be giving up on CCCTB, and we can then export our views at a global level. We are not talking about fairness as an anti business agenda, but about letting business have a level playing field across the EU and beyond. It gives equal opportunity for entrepreneurs.

The world is complex. There is no silver bullet. But we have many initiatives on the table – anti money laundering, CBCR, list of non-cooperative jurisdictions and CCCTB.


Jim Clarken

The 8 wealthiest men in the world, own the same wealth as about 3.6 billion people. Global inequality is getting out of control. But this is not an “anti wealthy” agenda, but an “anti poverty” one.

 One of the core issues is fair tax system. The UN estimates that $100 billion of tax revenue is lost to developing countries each year.

Corporate taxes in developing countries are more important than in developed countries, as corporate tax is simpler to introduce at an earlier stage in development.

Public CBCR, which can be scrutinised by governments and stakeholders, is vital. The EU is making steps, but it is always the case that political compromises are included. We are concerned about the safeguarding principles being included now, as this could facilitate large MNEs continuing to avoid paying their fair share of tax. There was no such safeguard when CBCR was introduced for the financial services sector.

BEPS is a step I the right direction, but was flawed from the outset, as many countries were excluded. We need a global body to address this issue. Would the climate change agenda have progressed if it had excluded developing countries?

Incentives, patent boxes and rulings should be challenged as to whether they have a positive impact on the country.

We are very supportive of the concept of CCCTB, and also support looking at sanctions against tax havens. The OECD said last night only Trinidad and Tobago is a tax haven. The EU really needs to challenge this idea.

The public have lost trust. Oxfam Ireland ran a campaign in Ireland, and 86% of the population said corporate taxation was an issue for them. We need to re-engage with the public. They have to feel that is works for them as citizens, and that we can be global citizens.

When we talk about fairness we have to mean that. It is not an anti-MNE agenda, but MNEs rely of public services too.

On Brexit, the UK is leaving the EU, not leaving the world. It must continue to act as a global citizen, in particular in relation to Crown Dependencies.

Our big concern is that supporting developing countries to implement reform is ok, but they need to be in at the ground floor, as part of developing that tax reform. We are holding our for a global tax body.


Will Morris

We are not talking about structures and theories, but people.

I believe business can do great things. Business has a role to play. At the same time, there is aggressive tax avoidance that needs to be squeezed out of the system, by changing the rules and brining balance back to the system.

There was concern about the BEPS process from the start, with the exclusion of developing countries. This was clearly a problem, but the Inclusive Framework is a step in the right direction.

There is very convincing evidence that when country reaches 15% of GDP, there is a step change in how a country behaves towards its citizens.

It was probably a mistake to leave the residence versus source basis of taxation argument out of BEPS. Business is often relatively neutral on these issues. Sometimes the problem is countries agreeing between themselves how to change the rules. In many cases businesses are agnostic, as long as there isn’t double taxation.

Will went on to talk about the principles BIAC put forward for how businesses should engage with tax authorities, which can be found here.

Brexit is a geopolitical disaster the UK has imposed upon itself. But there is no evidence at the moment of the UK backing away from the fair tax debate.

There is still too much in this debate where people shout at each other rather than engaging and agreeing.


Richard Murphy

Richard started by making a clear statement that he believes that transparency is what is really needed.

What do we actually mean by global tax fairness? What we mean is the right amount of tax, in the right place and at the right time. “Right” means that it reflects the actual activity happening on the ground, which cuts out all profit shifting.

There is no such thing as tax competition. There is tax warfare. Tax havens are the aircraft carriers sitting off the coast to wage war on the tax base. The real purpose of a patent is to shift profits to a tax haven.

It has taken 15 years to reach the stage when we are really talking about public CBCR. Transparency is not about sharing information between countries. If tax havens tell me that they are being transparent because they plan to share information, I tell them they are not. Tax transparency is about being able to see it, trust it, and feel the consequence of it. So CBCR is essential.

Whatever happens next week in the European Parliament won’t be good enough. The OECD template is the minimum.

We are taxing the world on the basis of a fairy-tale, that every company in a group is a separate entity, completely unrelated to every other company in the group. This is nonsense. Businesses generate greater value through those entities working together, so taxing them individually makes no sense. You have to tax them as a group.

CBCR was deliberately designed to show the weaknesses. It is not a tax system. It is an accounting standard. It tests whether tax is paid in the right place. It is about reclaiming accounting for people to hold companies to account.