Feelgood drives tax obsession

In: Uncategorized

24 Jun 2013

Any campaign that declares itself, in effect, for Good and against Evil should be treated with suspicion. That certainly applies to the G8 Lough Erne Declaration issued by the world’s leaders at their summit in Northern Ireland.

The first item in the declaration – named after the luxury hotel and spa where the world leaders stayed – declared that: “Tax authorities across the world should automatically share information to fight the scourge of tax evasion.”

The next two clauses emphasised the need for companies to be transparent about their tax liabilities. It said firms should provide the necessary information and law enforcers should be able to obtain it.

It is striking that these statements are almost truisms. Tax evasion is, by definition, illegal. So in effect the first clause is saying that countries should cooperate to ensure the law is obeyed in this area.

Even David Cameron’s criticisms of “aggressive tax avoidance” seem almost beyond debate. Although “tax avoidance” is legal the term “aggressive” is broad enough for almost everyone to accept it in one sense or another.

Yet the prime minister has been arguing for months that national leaders should oppose such behaviour. At EU summit after EU Summit he has repeated such calls.

Nor is he an isolated voice. Angela Merkel, the German chancellor, has voiced opposition to tax evasion as has France’s president François Hollande.Admittedly the dynamics vary a little in each country. Hollande’s credibility was damaged when Jérôme Cahuzac, his then budget minister, admitted to concealing €600,000 (£510,000) in an undeclared foreign account. Hollande has also taken a much harder line against tax havens than Cameron – not surprising considering Britain’s historical links with offshore centres such as Guernsey, Jersey and the Isle of Mann.

Merkel has also been indirectly associated with a tax scandal. Ulli Hoeneß, the president of Bayern Munich and a former German football star, has admitted avoiding taxes by using a Swiss bank account. Although there is no suggestion that they were involved, conservative politicians used to like being photographed with the footballing celebrity.

Nevertheless there is no doubt that Merkel and Hollande, along with other political leaders too, are against tax evasion. It would be strange to assume otherwise.

Nor is such sentiment confined to politicians. The Organisation for Economic Cooperation and Development (OECD), a rich country think tank, has just published a report calling for the automatic exchange of tax information.

Meanwhile, the IF campaign on world hunger made lobbying around tax a key theme around the G8 Summit. Like political leaders and the OECD it sees transparency around tax as a priority. IF is supported by a large number of organisations including the Church of England, Christian Aid, Oxfam and the Salvation Army.

Of course world leaders will not go as far as some of the most avid campaigners want. But there should be no doubt that most of their pronouncements have them pushing at an open door.

Yet it is the uncontroversial character of these statements that is precisely the problem. The main goal of the campaign seems to be to make global leaders feel they are doing something positive. It gives them a sense of purpose.

The difficult challenges facing the world – issues that could provoke heated debate – are carefully left on the sidelines.

This blog post first appeared last Thursday on Fundweb.