The fight for tax justice – the lessons from Panama & Co.

Conference discussed approaches against tax avoidance and evasion

A conference hosted by the SPÖ Parliamentary Club debated how to achieve more tax justice. The main topic was the necessity of concrete measures both at national and international level. Which lessons can and must be learned from the Panama Papers and where do approaches exist to prevent corporations but also wealthy individuals to avoid paying tax, were the key issues.

How tax avoidance causes economic inequality

Mark Pieth, anti-corruption expert at Basel University, emphasised the conspicuous issues of the Panama Papers, namely the large number of politicians involved in corruption. Pieth regards the conduct of banks and large law and accounting firms as a massive problem, as they are equally responsible for undermining the social systems through tax avoidance. One of the most effective methods to find out more about these devious constructions is to demand more transparency.

Richard Murphy, City University of London, stated that circa fifteen years ago implementing country-by-country-reporting would have been unthinkable. However, various leaks, not least of the Panama Papers made a speedier process possible. Nevertheless, the growing economic and social inequality due to tax avoidance and evasion via tax havens is obvious. Murphy pointed out that this was above all possible because of the lack of transparency.

Overall, the tax systems favour certain interests, the consequence of which is that the match between rich against poorer states is won by the wealthy ones.

Political challenges

However, it has been possible to make some steps in the right direction, such as the introduction of country-by-country-reporting – even though here too one has to criticise a lack of transparency. The progress of implementing a Common Consolidated Corporate Tax Base is far too slow and only planned to be undertaken in stages. Apart from that, the lack of an agreement concerning an EU-wide minimum corporate tax rate is a big problem, which fuels the tax race to the bottom.

An EU interest barrier shall above all prevent shifting profits abroad. This means banning the deduction of borrowing costs. The regulation shall have been implemented in the national parliaments of the Member States by 1.1.2019, provided an already existing comparable provision does not effect an extension until 2024.