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BackA seminar on questions concerning fair taxation worldwide took place in Brussels on 30 January 2014. This had been organised among others by the Belgian General Federation of Labour “ABVV-FGTB”, which is the Socialist trade union organization in Belgium, and the Walloon National Centre for Development Cooperation “CNCD 11.11.11”. An important point of the discussion was the so-called action plan of the OECD against “Base Erosion and Profit Shifting” (BEPS). Even though this action plan has to be seen as a step in the right direction because issues of fair taxation are being discussed at last, the concrete implementation does nevertheless reveal certain discrepancies from a trade union point of view.
“Base Erosion and Profit Shifting” (BEPS)
In June 2013, the Organisation for Economic Co-operation and Development (OECD) presented a concept under the name of “Base Erosion and Profit Shifting” (BEPS) within the scope of the G20 meeting in Moscow. In essence, BEPS describes the phenomenon according to which government tax revenues systematically decrease because of outdated national and international tax systems. Wealthy individuals and multinational concerns are using these regulatory loopholes to minimise their tax burden by applying formal legal means. In particular companies exploit complex corporate constructions to ensure that their generated profits are always taxed in the country with the lowest tax rate. Thus profits are not taxed where they are generated. The result has been the emergence of a rapid global tax competition between individual countries over the past decades. At the same time, large segments of the population have to cope with an increasing tax burden.
The OECD action plan
Based on the BEPS study, the OECD has developed an action plan against BEPS. Tax avoidance in Europe means that the Treasury loses an amount of ca. EUR 150 billion p.a., which are urgently needed in the fight against mass unemployment and for sustainable services of general interest. Developing countries are also strongly feeling the impact of these dramatic developments. Due to the opaque corporate constructions of transnational concerns it is difficult to come up with concrete figures; however, experts estimate the annual loss based on tax fraud to be in the region of ca. EUR 1,000 billion.
The action plan includes fifteen concrete measures against BEPS. The intention is to set up, among other, an automatic information exchange between governmental tax authorities, which has already been formally agreed by the G20 states in September 2013.
At the seminar on 30.1.2014, many NGOs and trade unions demanded to establish a public global company register, where the profits of the respective locations of multinational concerns, as well as their owners and the precise number of the members of staff they employ are listed.
OECD vs. trade unions and NGOs
The event from 30.1.2014 revealed the divisions between the approach adopted by the OECD and demands of trade unions and NGOs. Renata Fontana, OECD Centre for Tax Policy and Administration (CTPA), presented the process of developing the specific targets of the action plan. In concrete terms, the OECD is trying to improve the integration of employers’ and labour representatives as well as of civil society. Integration in this context means the opportunity to bring in content-related proposals within the scope of a consultation process.
The implementation of this approach was in particular criticised by Pierre Habbard, senior policy advisor to the Paris-based Trade Union Advisory Committee to the OECD (TUAC). Pierre Habbard disapproved of the strong dominance of business lobbyists in the consultation process. So far, ca. 95 % of all content-related proposals had been made by lobbying groups of corporations and only 5 % by trade unions and NGOs. The reason for this was above all the immense funds multinational concerns were able to spend on their lobbying activities.
In turn, representatives of NGOs working in the field of development politics are concerned about the fact that developing countries will not have a vote with regard to hammering out the concrete implementation proposals of the action plan. Even Renata Fontana has confirmed that developing countries have only a vote in the consultation process, but no formal voting right.
Outlook
In 2014, the implementation of the action plan will also be discussed with the developing countries within the scope of several regional discussion forums. In more general terms, it is planned to have completed a comprehensive formulation of concrete proposals on implementing the action plan by December 2015. One can only hope that in spite of the strong dominance of business representatives engaged in lobbying activities, the requirements of trade unions will be sufficiently taken into account.
Further information:
BEPS website of the OECD
Trade Union Advisory Committee to the OECD (TUAC)
In June 2013, the Organisation for Economic Co-operation and Development (OECD) presented a concept under the name of “Base Erosion and Profit Shifting” (BEPS) within the scope of the G20 meeting in Moscow. In essence, BEPS describes the phenomenon according to which government tax revenues systematically decrease because of outdated national and international tax systems. Wealthy individuals and multinational concerns are using these regulatory loopholes to minimise their tax burden by applying formal legal means. In particular companies exploit complex corporate constructions to ensure that their generated profits are always taxed in the country with the lowest tax rate. Thus profits are not taxed where they are generated. The result has been the emergence of a rapid global tax competition between individual countries over the past decades. At the same time, large segments of the population have to cope with an increasing tax burden.
The OECD action plan
Based on the BEPS study, the OECD has developed an action plan against BEPS. Tax avoidance in Europe means that the Treasury loses an amount of ca. EUR 150 billion p.a., which are urgently needed in the fight against mass unemployment and for sustainable services of general interest. Developing countries are also strongly feeling the impact of these dramatic developments. Due to the opaque corporate constructions of transnational concerns it is difficult to come up with concrete figures; however, experts estimate the annual loss based on tax fraud to be in the region of ca. EUR 1,000 billion.
The action plan includes fifteen concrete measures against BEPS. The intention is to set up, among other, an automatic information exchange between governmental tax authorities, which has already been formally agreed by the G20 states in September 2013.
At the seminar on 30.1.2014, many NGOs and trade unions demanded to establish a public global company register, where the profits of the respective locations of multinational concerns, as well as their owners and the precise number of the members of staff they employ are listed.
OECD vs. trade unions and NGOs
The event from 30.1.2014 revealed the divisions between the approach adopted by the OECD and demands of trade unions and NGOs. Renata Fontana, OECD Centre for Tax Policy and Administration (CTPA), presented the process of developing the specific targets of the action plan. In concrete terms, the OECD is trying to improve the integration of employers’ and labour representatives as well as of civil society. Integration in this context means the opportunity to bring in content-related proposals within the scope of a consultation process.
The implementation of this approach was in particular criticised by Pierre Habbard, senior policy advisor to the Paris-based Trade Union Advisory Committee to the OECD (TUAC). Pierre Habbard disapproved of the strong dominance of business lobbyists in the consultation process. So far, ca. 95 % of all content-related proposals had been made by lobbying groups of corporations and only 5 % by trade unions and NGOs. The reason for this was above all the immense funds multinational concerns were able to spend on their lobbying activities.
In turn, representatives of NGOs working in the field of development politics are concerned about the fact that developing countries will not have a vote with regard to hammering out the concrete implementation proposals of the action plan. Even Renata Fontana has confirmed that developing countries have only a vote in the consultation process, but no formal voting right.
Outlook
In 2014, the implementation of the action plan will also be discussed with the developing countries within the scope of several regional discussion forums. In more general terms, it is planned to have completed a comprehensive formulation of concrete proposals on implementing the action plan by December 2015. One can only hope that in spite of the strong dominance of business representatives engaged in lobbying activities, the requirements of trade unions will be sufficiently taken into account.
Further information:
BEPS website of the OECD
Trade Union Advisory Committee to the OECD (TUAC)