Thomas Piketty writes:
The question of tax havens and financial opacity has been
headline news for years now.
Unfortunately, in this area there is a huge gap
between the triumphant declarations of governments and the reality of what they
actually do.
In 2014, the LuxLeaks
investigation revealed that multinationals paid almost no tax in Europe, thanks
to their subsidiaries in Luxembourg.
In 2016, the Panama Papers have shown the
extent to which financial and political elites in the north and the south
conceal their assets.
We can be glad to see that the journalists are doing
their job. The problem is that the governments are not doing theirs.
The truth
is that almost nothing has been done since the crisis in 2008. In some ways,
things have even got worse.
Let’s take each topic in turn.
Exacerbated fiscal competition on the taxing of profits of big companies has
reached new heights in Europe.
The United Kingdom is going to reduce its rate to 17%, something unheard of
for a major country, while continuing to protect the predatory practices of the
Virgin Islands and other offshore centres under the British Crown.
If nothing
is done, we will all ultimately align ourselves on the 12% of Ireland, or
possibly on 0%, or even on grants to investments, as is already sometimes the
case.
In the meantime, in the United States where there is a federal tax on
profits, that rate is 35% (not including the taxes levelled by states, ranging
between 5% and 10%).
It is the political fragmentation
of Europe and the lack of a strong public authority which puts us at the mercy
of private interests.
The good news is that there is a way out of the current
political impasse.
If four countries, France, Germany, Italy and Spain, who
together account for over 75% of the GDP and the population in the eurozone put
forward a new treaty based on democracy and fiscal justice, with as a strong
measure the adoption of a common tax system for large corporations, then the
other countries would be forced to follow them.
If they did not do so they
would not be in compliance with the improvement in transparency which public
opinions have been demanding for years and would be open to sanctions.
There is still a complete lack of transparency as far as
private assets held in tax havens are concerned. In many areas of the world,
the biggest fortunes have continued to grow since 2008 much more quickly than
the size of the economy, partly because they pay less tax than the others.
In
France in 2013 a junior minister for the budget calmly explained that he did
not have an account in Switzerland, with no fear that his ministry might find
out about it. Once again, it took journalists to reveal the truth.
Automatic transmission of
information about financial assets, which is officially accepted in Switzerland and is still refused in Panama, is meant to deal with
the question in the future.
The only drawback is that this will only begin to
be applied, somewhat cautiously, from 2018, with glaring exceptions, for
example for the shares held in trusts and foundations.
All this has been set up
without the slightest sanction being laid down for countries which default.
In
other words, we continue to live under the illusion that the problem will be
resolved on a voluntary basis, by politely requesting tax havens to stop
behaving badly.
It is urgent to speed up the process and impose heavy trade and
financial sanctions on countries which do not comply with strict rules.
Let there be no mistake: only
repeated application of sanctions of this type, at the slightest non-compliance
(and there will be some, including by our dear neighbours in Switzerland and
Luxembourg), will enable the credibility of the system to be established and an
end seen to this climate of lack of transparency and widespread practice of
impunity for many decades.
At the same time, a unified
register of financial securities must be established; this involves putting
Central Depositories under public control (Clearstream and Eurostream in
Europe, Depository Trust Corporation in the United States) as Gabriel Zucman has clearly shown.
In support
of this approach, a common registration fee for these assets could also be
envisaged, with the revenue used to finance a global public good (for example,
the climate).
There is still one question outstanding: why have
governments done so little since 2008 to combat financial opacity?
The simple
answer is that they were under the illusion that there was no need to act.
Their central banks had printed enough currency to avoid the complete collapse
of the financial system, thus avoiding the mistakes which post-1929 led the world
to the brink of complete collapse.
The outcome is that we have indeed avoided a
widespread depression but in so doing we have refrained from the necessary
structural, regulatory and fiscal reforms.
We could reassure ourselves by
noting that the balance sheet of the major central banks (which has risen from
10% to 25% of GDP) remains low in comparison with the total financial assets
held by public and private actors over each other (approximately 1,000% of GDP
or even 2,000% in the United Kingdom) and could rise further in case of need.
In reality, this mainly reveals the persistent hypertrophy of private-sector
balance sheets and the extreme fragility of the system as a whole.
It is to be
hoped that the world will learn from the lessons of the Panama Papers and at
long last combat financial opacity without waiting for a further crisis.
No comments:
Post a Comment