{"id":45068,"date":"2019-05-16T08:19:46","date_gmt":"2019-05-16T07:19:46","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=45068"},"modified":"2019-05-16T08:19:46","modified_gmt":"2019-05-16T07:19:46","slug":"tax-spillover-the-way-to-assess-a-countrys-tax-risk","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/05\/16\/tax-spillover-the-way-to-assess-a-countrys-tax-risk\/","title":{"rendered":"Tax spillover: the way to assess a country&#8217;s tax risk"},"content":{"rendered":"<p>I gave a talk in\u00a0 Vienna last night. These were the slides: I hope the logic flows. I will do more posts on tax spillover very soon:<\/p>\n<ol>\n<li><strong>Austria has a problem with tax<\/strong><\/li>\n<\/ol>\n<ul>\n<li>That Austria has a problem with tax is not a surprise to anyone<\/li>\n<li>But in this talk I\u2019ll show that the problem may not be the one that you think it is<\/li>\n<li>And that the solution may be much closer to home than you expect<\/li>\n<\/ul>\n<ol start=\"2\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>What 15 years of tax justice have taught us<\/strong><\/li>\n<\/ol>\n<ul>\n<li>It\u2019s more than fifteen years ago that I co-founded the Tax Justice Network<\/li>\n<li>Since then the message has been\n<ul>\n<li>Multinational companies are not paying their taxes<\/li>\n<li>Tax havens are a major cause of this problem<\/li>\n<li>And so is transfer pricing abuse<\/li>\n<li>Whilst the accountants and lawyers who support these places are the creators of much of the problem<\/li>\n<li>And that was all true<\/li>\n<li>And its what many in tax justice are still saying<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"3\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>But things have moved on<\/strong><\/li>\n<\/ol>\n<ul>\n<li>We\u2019ve made massive wins\n<ul>\n<li>Country-by-country reporting - the idea I had in 2003 - is now the law for tax reporting in 70 countries around the world. No one is more surprised than me<\/li>\n<li>Automatic information exchange from tax havens is happening and I think it\u2019s having an effect<\/li>\n<li>Some advance on beneficial ownership data is being made<\/li>\n<\/ul>\n<\/li>\n<li>And we expect to win more\n<ul>\n<li>Country-by-country is going to be a public accounting standard - it\u2019s just a matter of when<\/li>\n<li>The tax havens will be ground down to deliver yet more transparency<\/li>\n<\/ul>\n<\/li>\n<li>And one day EU countries might catch up with them<\/li>\n<\/ul>\n<ol start=\"4\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>We are winning<\/strong><\/li>\n<\/ol>\n<ul>\n<li>For example\n<ul>\n<li>The IMF thinks that corporate tax abuse costs the world $600bn and tax justice academics Alex Cobham and Petr Jasky think it\u2019s $500bn<\/li>\n<li>The IMF estimate is that this costs Austria US$0.8bn, 1.19% of GDP<\/li>\n<li>The Cobham \/ Jansky estimate is $0.54bn or 0.13% of Austrian GDP.<\/li>\n<\/ul>\n<\/li>\n<li>And I have just estimated the cost of banks shifting profits in the EU - this is unpublished as yet\n<ul>\n<li>I make the total tax cost to the EU from bank profit shifting just \u00e2\u201a\u00ac3.2bn in total a year<\/li>\n<li>And for Austria just \u00e2\u201a\u00ac46 million<\/li>\n<\/ul>\n<\/li>\n<li>I suspect these estimates broadly reconcile<\/li>\n<\/ul>\n<ol start=\"5\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>In other words<\/strong><\/li>\n<\/ol>\n<ul>\n<li>We\u2019re beating corporate tax abuse<\/li>\n<li>Country-by-country reporting is working<\/li>\n<li>Pressure is yielding results<\/li>\n<li>And full public country-by-country reporting should have a massive impact on solving this issue \u2014 because no one wants to be the next Google, Amazon or Starbucks<\/li>\n<li>Real reform of digital tax would help<\/li>\n<li>So too would unitary corporation tax \u2014 but I think that will happen<\/li>\n<li>We have things to celebrate then, but we have to keep the pressure up to make sure they\u2019re all really delivered<\/li>\n<\/ul>\n<ol start=\"6\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>But don\u2019t get carried away<\/strong><\/li>\n<\/ol>\n<ul>\n<li>This is corporate tax avoidance<\/li>\n<li>Individuals do tax avoidance as well<\/li>\n<li>And tax evasion is a vastly bigger problem than tax avoidance - and that has always been true<\/li>\n<li>What is more the problem is not fundamentally one of tax havens now - important as ending their abuse for good is<\/li>\n<li>The real issue in Europe now is domestic tax evasion<\/li>\n<li>But don\u2019t forget that the corporate tax abuse of developing countries is continuing too \u2014 and the SDGs mean was have to still tackle this as well<\/li>\n<\/ul>\n<ol start=\"7\">\n<li><strong>To put this in context<\/strong><\/li>\n<\/ol>\n<ul>\n<li>Earlier this year I presented a report to the S&amp;D Group in the EU Parliament on the cost of tax abuse in Europe.<\/li>\n<li>The key findings were:\n<ul>\n<li>EU wide tax evasion is not less than \u00e2\u201a\u00ac825bn a year<\/li>\n<li>Tax avoidance is between \u00e2\u201a\u00ac50bn and \u00e2\u201a\u00ac190bn a year<\/li>\n<li>Total losses could exceed \u00e2\u201a\u00ac1 trillion a year then<\/li>\n<\/ul>\n<\/li>\n<li>Of this sum Austria is likely to be losing at least \u00e2\u201a\u00ac13 billion to evasion a year<\/li>\n<li>This is much higher than the cost of corporate tax avoidance already noted<\/li>\n<\/ul>\n<ol start=\"8\">\n<li><strong>How do we know Austria is losing?<\/strong><strong>\u00e2\u20ac\u00a8<\/strong><\/li>\n<\/ol>\n<ul>\n<li>Austria has a substantial shadow economy<\/li>\n<li>The EU estimate it at about \u00e2\u201a\u00ac31 billion a year<\/li>\n<li>Two peer-reviewed estimates by economists - one for the IMF - strongly supported that estimate - the average of all three was \u00e2\u201a\u00ac31bn as well<\/li>\n<li>And Austria has an average tax rate across all taxes of 43.2%<\/li>\n<li>This suggests tax evasion costs more than \u00e2\u201a\u00ac13 billion a year<\/li>\n<\/ul>\n<ol start=\"9\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>Austrians are very law-abiding<\/strong><\/li>\n<\/ol>\n<ul>\n<li>Shadow economy estimates for Austria average 8.25% of GDP<\/li>\n<li>Only Luxembourg (7.98%) Sweden (8.07%) and The Netherlands (8.29%) do better in the EU<\/li>\n<li>The worst are Romania (29.51%) Greece (26.11%) and Malta (25.42%).<\/li>\n<li>The average is 16.53%<\/li>\n<li>Germany is 10.10% and Italy 23.28%<\/li>\n<\/ul>\n<ol start=\"10\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>Is \u00e2\u201a\u00ac13bn worth ignoring?<\/strong><\/li>\n<\/ol>\n<ul>\n<li>I suggest not<\/li>\n<li>You have a problem with tax<\/li>\n<li>But not the one you thought you\u2019d got, I suspect<\/li>\n<li>So what can be done?<\/li>\n<li>The answer is a tax spillover analysis<\/li>\n<\/ul>\n<ol start=\"11\">\n<li><strong>\u00e2\u20ac\u00a8<\/strong><strong>Tax spillover analysis<\/strong><\/li>\n<\/ol>\n<ul>\n<li>A new idea<\/li>\n<li>A tax spillover analysis measures the impact, whether favourable or unfavourable, one part of a tax system has on another part of the tax system<\/li>\n<li>A new methodology to appraise this risk has been developed by Prof Andrew Baker of Sheffield University and myself<\/li>\n<li>Search our names and journal name Global Policy to find it<\/li>\n<li>What we propose is a qualitative appraisal of eight high risk parts of the tax system<\/li>\n<li>The aim is to find the biggest problems that are easiest to put right with the greatest chance of getting more tax<\/li>\n<\/ul>\n<ol start=\"12\">\n<li><strong>Doing a spillover appraisal<\/strong><\/li>\n<\/ol>\n<ul>\n<li>The spillover checks risks created by at last four taxes:\n<ul>\n<li>Income tax<\/li>\n<li>Corporation tax<\/li>\n<li>Capital gains tax<\/li>\n<li>Social security<\/li>\n<\/ul>\n<\/li>\n<li>And four areas of tax administration:\n<ul>\n<li>Tax policy \/ politics<\/li>\n<li>Tax administration<\/li>\n<li>Company and trust law administration<\/li>\n<li>International tax laws<\/li>\n<\/ul>\n<\/li>\n<li>And fills in a grid with marks on a scale of one to 5 \u2014 with 5 being the biggest risk<\/li>\n<\/ul>\n<ol start=\"13\">\n<li><strong>This is the UK domestic spillover risk table:<\/strong><\/li>\n<\/ol>\n<p><strong><a href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/05\/16\/tax-spillover-the-way-to-assess-a-countrys-tax-risk\/screen-shot-2019-05-16-at-08-15-22\/\" rel=\"attachment wp-att-45069\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-45069\" src=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22-550x317.png\" alt=\"\" width=\"550\" height=\"317\" srcset=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22-550x317.png 550w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22-520x300.png 520w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22-768x443.png 768w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22-600x346.png 600w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.22.png 1774w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a>\u00a0<\/strong><\/p>\n<ol start=\"14\">\n<li><strong>The UK tax system is in deep trouble<\/strong><\/li>\n<\/ol>\n<ul>\n<li>From politicians who seek to undermine its effectiveness<\/li>\n<li>For a tax administration that hasn\u2019t got the resources to enforce the law<\/li>\n<li>And a company and trust administration system that lets tax evaders hide their money from tax authorities \u2014 and get away with it<\/li>\n<li>That\u2019s why the right hand side of the table is so red and the left hand side not so much so<\/li>\n<li>It\u2019s really not good<\/li>\n<li>So we lose vastly more tax than you do<\/li>\n<\/ul>\n<ol start=\"15\">\n<li><strong>But internationally, we\u2019re not so bad<\/strong><\/li>\n<\/ol>\n<p><a href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/05\/16\/tax-spillover-the-way-to-assess-a-countrys-tax-risk\/screen-shot-2019-05-16-at-08-15-38\/\" rel=\"attachment wp-att-45070\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-45070\" src=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38-550x347.png\" alt=\"\" width=\"550\" height=\"347\" srcset=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38-550x347.png 550w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38-476x300.png 476w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38-768x484.png 768w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38-600x378.png 600w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2019\/05\/Screen-Shot-2019-05-16-at-08.15.38.png 1760w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><\/p>\n<ol start=\"16\">\n<li><strong>The UK\u2019s a threat to the world<\/strong><\/li>\n<\/ol>\n<ul>\n<li>The chart is very red \u2014 still \u2014 especially because we form companies for less than \u00e2\u201a\u00ac20 euros with no anti-money laundering questions asked<\/li>\n<li>But the point is \u2014 what this chart shows is we could massively improve our tax spillover situation by taking some simple actions<\/li>\n<li>And I strongly suspect it\u2019s the same in Austria<\/li>\n<\/ul>\n<ol start=\"17\">\n<li><strong>You can solve your tax problems <\/strong><\/li>\n<\/ol>\n<ul>\n<li>But you\u2019ll need to do a tax spillover analysis to get best value for money from doing so<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I gave a talk in\u00a0 Vienna last night. These were the slides: I hope the logic flows. I will do more posts on tax spillover<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2019\/05\/16\/tax-spillover-the-way-to-assess-a-countrys-tax-risk\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,55,50,175],"tags":[],"class_list":["post-45068","post","type-post","status-publish","format-standard","hentry","category-tax-avoidance","category-tax-evasion","category-tax-gap","category-tax-spillovers"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/45068","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=45068"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/45068\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=45068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=45068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=45068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}