Panama Papers… and much more.

The idea that the two latest tax scandals (Luxleaks and Panama Papers) in recent months are only the tip of the iceberg is widely shared. Money flees and hides from tax collectors in opaque financial spaces. Financial engineering in the capitalist global financial system has created such a complicated tangled web that one can say we are only getting to know about a generalised practice that hinders public finances across the world.

Graphically, the philosopher Salavoj Zizek, commented on the intrinsicness of such practices in todays’ world in an article titled ‘Why does the dog lick his testicles?’ saying, “Corruption is not a possible deviation of the global capitalist system, it is part of its basic functioning”.

Thus, the enormous scale of scandal uncovered (it is estimated tax havens hide 6 trillion Euros, equivalent to about 130 billion Euros in lost public finances) and the public indignation that it steered (there are few things on which 99% of the population agrees on more than the immoral and shameful nature of these activities) convert these episodes into a ‘window of opportunity’ to fight tax fraud.

Gratitude is in order towards those that have put this information on our screens. Be they exemplary citizens risking their careers and their security (whistle-blowers) laying bare banking and judicial practices or questionable actions from states, or the consortium of investigative journalists, or a brilliant hacker, or the USA in its tracing of money financing terrorism, or the police officers investigating organised crime’s money flows. I do not care. What matters is that a crystal ceiling has set on the opacity and obscurantism of hidden money. Nobody is exactly sure who or how but if it is not a judge, it will be your national tax collector, or the social opprobrium that sticks to transparency, the one that will unearth these practices.

Unfortunately, it is not that easy. The task presenting itself to those that must guide and implement these proposals to combat this unacceptable state of affairs is colossal. To start with, we are operating here in a supranational sphere where the tables of global governance have failed miserably. Personally, I think the situation calls for an international Fiscal Summit similar to the one that unfolded in Paris last year on climate change, at the request of the UN, and based on technical assessments from the OECD.

What is required as a first step is a globally agreed definition of ‘tax haven’. Based on this globally accepted definition, it would be possible to draw a list of international tax havens to then negotiate a framework of economic and commercial sanctions against them. Amongst them, it will be necessary to set up a fiscal tax (+- 50%) on transactions heading to those countries.

The fight against tax havens should also include the creation of a Public Registry in an international organisation (the IMF for example) of offshore companies and shell companies indicating the holders, as well as an international agreement with the bank to secure transparency of its operations in those countries. As you can see, nothing easy, and nothing on the short term.

Europe is heading these efforts. Because of the LuxLeaks, a crusade against company tax fraud has taken shape (especially against those that decide to lead operations in multiple countries and technologies that operate on the ‘Cloud’ and establish their fiscal responsibility wherever they feel like it). Here, progress is more pragmatic, and real. We started by establishing an ‘obligation to inform’ between member states of the EU on all fiscal arrangements between countries and companies that could be detrimental to neighbouring countries. We keep on fighting to force large companies to publish (Country By Country Reporting) on their website their revenue and contribution in taxes on a national basis. With the OECD, we are currently working on the establishment of a Common Consolidated Corporate Tax Base (CCCTB), and measures are being taken against TVA fraud.

Never, in such a short span of time, have political and technical efforts put to the service of fighting tax fraud in the EU. It is not just the social consternation in the face of blatant injustices, but also the inevitable realisation that such sums of money could, and ought, to be reinvested into our public finances — starving as a consequence of the crisis.

In my intervention in the European Parliament, I starkly emphasised that such practices are commensurate to stealing from citizens and their well-being, and that we probably find ourselves at the onset of a fiscal revolution, the world around which, hopefully, will finalise in the establishment of a progressive and global wealth and capital gains tax. Such a proposal has been put forward by the French economist Mr. Piketty, in the hope that it will discourage tax fraud and, collected by an agency of the UN, used to finance global public goods. That way, we can also fight rising inequalities in western societies.

(El Correo, April 2016)