Taxation and development
For those who missed this year’s Global Tax Policy Conference organized by Maastricht University, a nice report is available from ViceVersa, also in Dutch. The report highlights the perspective of developing countries, drawing from the excellent presentations of UN’s chief of international tax cooperation Michael Lennard and ICTD’s CEO Mick Moore. Hartin Hearson also wrote a nice blog on spillover analysis, inspired by the presentation of IBFD’s knowledge centre director Belema Obuoforibo.
The slides of my own presentation are available here. In brief, I argued that tax leakages are often presented as a technical problem, resulting from loopholes and mismatches in legislation, that can be fixed by improving tax laws and technical guidelines. However, global tax reform does not work that way. It requires major political decisions. To a large extent, the OECD is denying this, avoiding difficult political decisions where possible and trying to solve tax dodging at the technical level. That approach results in solutions that are too weak and too complex.
Perhaps the best illustration is the OECD’s approach to corporate tax transparency. Instead of making a strong case for public reporting of corporate financial data on a country-by-country basis, the OECD settled on a complex system that involves confidential data exchange between tax authorities. That solution avoids political confrontations, but it is a weak comprimise that does not deserve to be called “transparecy”. It creates a large and completely unnecessary administrative burden for tax authorities, while the data will not be available outside those tax authorities to guide policy making, not even to the OECD itself.
So it’s time to face the politics of global tax reform, or else solutions will be too weak and too complex.