lunes, 23 de noviembre de 2015

Taxes, ethics and inequaility in the #digital world

One of the many fronts of the digital dispute between UE and US is the taxing issue. To cut a long story short, the US digital giants are accused of not not paying its fair share of taxes according with their economic importance. Although it has been one of the "well-known secrets", the tax engineering by multinationals came to the front page of papers and news channel with the Luxleaks, which uncovered tax rulings between Luxembourg Government and companies worldwide aiming at reducing tax payments. Among the companies was some of the GAFA club.

After some debates in the European Parliament, decided in february 2015 to set a special committee on tax rulings. The mission of the committee (TAXE) is to look  "tax rulings and other measures similar in nature and effect" going back to 1 January 1991 and make recommendations for the future. The initial mandate of the committee is for six months. However, it looks that the mandate will be extended for some more time

Although tax engineering practices are not an exclusive practice of the GAFA, their economic importance have made them one of the focus of the investigation. This fact has been reflected in the two-days session maintained by TAXE this week. 3 of the 13 multinational companies (MNC) invited to the session are members of the GAFA club. The minutes and news on the debate is a outstanding reflection of the differences and sometimes blurry frontier between legality and ethics in modern taxation.

It is important to remember, and the MNCs underlined it many times during the session that they have just follow the rules and, as the Luxleak revealed, with some governments as special advisors. However, perhaps not all the MNCs leaders are in peace of mind when the appearance on the committee has been under the threat to to revoke the accreditation of the lobbyists representing these companies in Brussels. Among the highlights of the session that reveals a lax ethic is the explicit recognition that some of their practices although "they do not erase any tax liability, it defers US tax" and that has any impact on the amount of taxes paid in the EU. Another interesting moment was when one MEP asked another company "why are you operating in the UK when according to your accounts you create no value there?”. Obviously, there is not a satisfactory answer to why they operate in countries where they lost money according with their tax declaration.

The OECD estimate conservatively the revenue losses due to tax engineering at USD 100-240 billion annually. That amount of money means a huge direct transfer from public welfare to private welfare, and therefore another (great) brick in the wall of inequality. One of the OECD reports of the BEPS project shows that this is not a problem of digital companies but of the digital world. Unethical tax practices have existed since the dawn of tax systems, but it looks it could be the common rule in the digital world. Either we force the application of ethical standards in tax practices or inequality will be the common rule in the XXI century.


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