Stiglitz: Trump Win Means Europe Must Lead Tax Evasion Fight

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By Joe Kirwin

Nov. 16 — Europe must take the lead in fighting against corporate tax evasion and secret tax havens in the wake of Donald Trump’s election as U.S. president, renowned economist Joseph Stiglitz told members of a special European Parliament Panama Papers investigative committee.

Referring to Trump as “evader-in-chief’’ in an appearance Nov. 16 before EU lawmakers, Stiglitz warned that measures to fight evasion under the Obama Administration will end.

“The U.S. Department of Treasury has taken measures in recent months to reveal beneficial owners of companies. But those efforts will come to a halt,” Stiglitz said.

EU lawmakers invited the former Clinton administration economist and Nobel economics prize winner to testify after he agreed to requests by Panama to head a committee that would probe the Panama Papers and measures that the Panamanian government should take to reform its system. Stiglitz and other members resigned in August after the Panamanian government reneged on a commitment to publish the committee’s report regardless of its content.

“I had hoped that our work requested by the Panama government would serve as a template on how all tax havens should be reformed,” Stiglitz said.

“After we resigned, we decided to continue our work and make recommendations,” he told the committee.

Stiglitz presented a pair of reports outlining measures to clamp down on tax havens and unfair tax competition. One of the two, “Overcoming the Shadow Economy,” suggests cutting tax havens out of the global financial system and creating mandatory publicly searchable registries in every country.

European Tax Laws Damaging

Despite urging Europe to take the lead against corporate tax evasion, he said European countries have contributed more to tax evasion than the U.S. because of residency rules.

“The U.S. tax laws force individuals and companies to pay taxes regardless of where they are working and doing business,” Stiglitz said.

“But European laws that only tax individuals and companies on income where they reside encourage money to be moved abroad.”

Beneficial Ownership Rules

He also called on the the European Union to sanction U.S. states such as Delaware and Nevada that maintain secrecy over the beneficial owners of companies.

According to Stiglitz, global rules revealing the beneficial ownership of companies are the the most important measure needed to crack down on global corporate tax evasion and tax havens.

“Without strict measures revealing individuals and companies that own companies, it will be very difficult to crack down on the use of shell companies registered in tax havens,” Stiglitz said.

“The Panama Papers was just the tip of the iceberg. This is a massive industry that is a global problem.”

Tax Competition

Parallel to the report on Panama and tax havens, Stiglitz and nine other tax experts serving on the Independent Commission for the Reform of International Corporate Taxation (ICRICT) concluded in a separate study that reducing tax competition among countries—which is “leading a race to the bottom"—will require:

  •  a minimum corporate tax rate;
  •  an end to special tax treatment for foreign and large companies such as those provided by Ireland to Apple Inc.;
  •  elimination of all tax breaks on profits; and
  •  civil society access to all tax debates.

Conduct Group Failure

Stiglitz and the other authors, in the ICRICT report on tax competition, insisted EU efforts to crack down on harmful tax competition via the Code of Conduct Group for Business Taxation have failed.

“It did not prevent any of the egregious abuses which have been revealed in recent years by the Luxembourg leaks scandal, investigations by the media and civil society and the illegal state aid inquiries of the European Commission,’' the report stated. It added that “free and fair tax competition amounts to no more than a race to the bottom.”

Stiglitz also urged EU lawmakers to push to have all tax rulings made public, and to sanction any country that imposes jail terms against whistleblowers.

A Luxembourg court recently handed down a suspended jail sentence against Frenchman Antoine Deltour for leaking documents that led to the LuxLeaks scandal revealing sweetheart tax rulings the Luxembourg government agreed with hundreds of multinational companies.

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The report on the shadow economy is at http://src.bna.com/j8w.The ICRICT report is at http://src.bna.com/j8x.

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