What have 5 years of tax campaigns achieved?

September 1, 2020

     By Duncan Green     

Guest post by Oliver Pearce

In early 2016, I joined Oxfam GB to lead its tax work. As I now prepare to leave Oxfam, a lot has changed in the world of tax (and the wider world too!). Early 2016 was before the Brexit referendum, the Trump presidency, England’s men joining the women’s team by winning the cricket world cup, and of course before the greatest recession any of us can recall. For those of us working for tax justice, what have we achieved, and what should we be focusing on in the years to come?

Tax justice campaigners have helped achieve significant progress over the past few years. Five years ago I don’t think many people would have predicted international negotiations on a corporate minimum effective tax rate. We’ve seen progress at the national level too – I’ve been inspired by the pioneering work of colleagues in Vietnam who successfully encouraged their government to require large multinationals to share details of their tax payments on a country by country basis with them. Here in the UK, thanks to persistent campaigning and coordination, the government agreed to require UK Overseas Territories – places like Bermuda and the Cayman Islands – to establish public records of who really owns companies registered there .

But the glass is only half full.

Five years ago it was reasonable to hope that by 2020 one of the biggest demands of tax justice campaigners – to make large companies publish tax and related data on a country-by-country basis – would now be law in many countries. But despite growing pressure on governments and companies, no international agreement has yet been reached, although we’ve come close in the EU , and specific rules apply in the financial and extractives sectors. It is still important for campaigners to keep pushing for this public good so that we can all see where companies are doing business, making profits and paying tax. Some companies are already publishing these details voluntarily; governments need to act to prevent a confusing proliferation of standards and to arrest the decline in confidence in tax compliance, particularly amongst companies.

In the absence of systematic public data about companies’ tax payments, we have relied on investigations and leaks such as the ground-breaking Panama Papers. These investigations have shown that many companies and individuals have taken advantage of global tax competition, secrecy and complex structures to dodge tax – at the expense of government revenues in rich and poor countries alike. But despite hardening public sentiment, parliamentary scrutiny, new laws and iconic cases such as Apple vs the European Commission,  it seems that companies can still pay low rates of tax. Four years after Oxfam set out our concerns over corporate tax battles, tax havens are still able to lead a race to the bottom – from which we all lose. So it is vital that we press for comprehensive rules which will prevent tax dodging and stop companies and individuals gaming the system to reduce the tax they pay.

This gaming of the system is one of the key reasons tax justice campaigners have focused on corporate tax in recent years. Corporate taxation is also one of the few taxes where international cooperation is vital to making substantial progress.- But there are also things campaigners within national borders can do – despite reforms, similar companies with similar profits can pay apparently quite different amounts of corporate tax for unknown reasons. This variance in effective tax rates needs addressing.

One step national governments can take without international cooperation is to review and repeal ineffective tax incentives, potentially saving  lots of money by using incentives more carefully.

The involuntary sacrifices citizens, companies and governments have made to stem the impact of the Covid crisis show what is possible once it is accepted that collective action is essential. If we can get publics and politicians to see the climate emergency in a similar way, we should push for tax policies that go far beyond our corporate tax priorities.   

Our movement should look for opportunities to show how tax policy and practice can help governments tackle inequality directly, as well as raising revenues that can be invested in public services. Post Covid, governments will need to develop plans that involve tax rises in the medium term. Rather than tinkering at the edges by advocating for a percentage point increase in a given tax, campaigners should be asking how tax can tackle inequality through redistribution, how taxes can address climate change, and how taxes can strengthen the social contract.

Oxfam and others have pressed for more effective use of wealth taxation, particularly for the richest. Compared to labour and consumption, wealth tends to be significantly under-taxed and could be vital for tackling inequality as well as raising much-needed revenues.

The UK’s council tax, inheritance tax, capital gains tax and stamp duty all need reform to make them fairer. Tax policy can directly support efforts to tackle climate change, through effective carbon taxes. Perhaps more radical ideas need to be proposed – such as a tax to limit household consumption beyond a certain carbon limit.

September 1, 2020
Duncan Green