Lough Erne declaration not taxing enough and falls short of expectations

THE Lough Erne Declaration on tax, a 10-point plan that fits neatly onto an A4 page, falls short of what most economists and campaigners were hoping to see emerge from the hyped group of eight meeting in a bankrupt hotel in Northern Ireland this week.

Lough Erne declaration not taxing enough and falls short of expectations

The final document lacks any detail and may be held up for years in challenges before any concrete action emerges from it. Campaigners say that it could be years before any of the declarations become actions.

The Irish Examiner’s Vincent Ryan asked some leading economists and tax campaigners what they would like to have seen emerge from Fermanagh.

Stephen Kinsella, Senior Lecturer in Economics at University of Limerick

I would love to see a common agreement to explore increased transparency an accountability standards across OECD. This is important to increase oversight over multi-national efforts to avoid tax.

I’d expect to see a statement on the importance of working together and not much else to be honest. The vested interests working against the common good on this are very strong, literally tens of billions of dollars are at stake.

Constantin Gurdgiev, economist based in Dublin and a regular panellist on Tonight with Vincent Browne on TV3

“The G8 is likely to adopt a very cautious and largely generalist approach to the discussion of the possible solutions to individual and corporate tax evasion. This would be welcome news, following weeks of high-pitched rhetoric emanating from Europe and the US. Any proposals to reduce the extent of tax evasion have to clearly differentiate legally-conducted tax optimisation from illegal tax evasion. In addition, the proposals should distinguish the drivers of tax optimisation that usually rest outside the jurisdictions which act as a conduit or a platform for tax optimisation. Furthermore, while enforcement and restrictive regulations can work in the case of individual tax evasion, it is the domestic incentives that should be targeted in tackling aggressive tax optimisation by corporations. All of this means that the G8 proposals on dealing with tax evasion and optimisation should include explicit consideration of the taxation regimes within the G8 states that are incentivising aggressive tax optimisation behaviour. Lowering tax rates, simplifying tax codes, enhancing the network of dual taxation treaties, and altering the basis for taxation should form the cornerstone of future reforms.”

Sheila Killian, Senior Lecturer, Accounting and Finance at University of Limerick

I’d like to see the aspirations expressed in the Lough Erne Declaration progressed, particularly “Countries should change rules that let companies shift their profits across borders to avoid taxes” . There’s scope there to make significant changes internationally that would prevent or at least reduce capital flight from developing countries. The register of ownership is also a useful idea, and it would be good to see that becoming public.

The real prize, though, is automatic exchange of information, and that’s where the short OECD report to the G8 summit was useful in setting out the steps needed in terms of lining up everything from legal systems to IT infrastructure.

Richard Murphy, chartered accountant and founder of the Tax Justice Network

I want:

1) A commitment to country-by-country reporting by multinational corporations to beat tax avoidance.

2) A commitment to transforming international tax system to ensure that tax is paid where profits are earned.

3) A commitment to multi-lateral information exchange — with it being demanded from all tax havens.

4) Public registries of the beneficial ownership of companies so we know who is hiding income, where.

What I expect? Well, that probably number 1, something vague on number 2, something weaker still on 3 which will encourage the OECD to do more work on this issue and on issue 4 — which is the really big one that could really beat tax evasion — I suspect almost nothing will happen.

This summit was the moment when the world’s leaders recognised that tax was an issue that could make or break the world economy. The sad fact is that it’s also likely to be the summit where we realised the world’s leaders decided they wanted to do nothing serious about it.

Maybe the communique should say ‘let tax crime pay’ .

Seamus Coffey, Lecturer in Economics in University College Cork

There is nothing unexpected in the declaration. The emphasis on information sharing between countries highlights that there still is no agreement on what actually needs to be changed by countries. Based on what is said here there will be no significant changes in international tax practices in the medium term.

It is right that the international system of corporation tax come under scrutiny.

The system needs to reflect the cross-border nature of modern businesses. Global corporations should pay a greater amount of tax on their massive profits which are only possible because of the legal and business environment that countries provide.

Governments provide the foundation of these and corporations should pay for something they benefit hugely from.

Ireland should be an active participant in this debate but we do not need to take any solo runs. If there are going to be international changes let them be the outcome of negotiation and agreement.

Ireland is not a tax haven but we do use the tax system to our advantage.

There is absolutely no point in giving that up because of some cage-rattling by foreign politicians.

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