Taxation and “fair share” or is it just more tax?

I had the pleasure of attending the EU Platform on Tax Good Governance last week in Brussels. There was plenty to discuss and I will write separately about the proposed subject to tax clause.

The forum has representatives from member states, business and civil society. What I found interesting was the position taken by some civil society delegates on “fair taxation”. One of the unfortunate parts of the forum is the grandstanding by some delegates stating their organisation’s position. Some of the Union representatives take the position that the objective of the forum should be to increase taxation by stopping evasion and avoidance and using this increase in tax to fund more public spending. This poses an interesting question, is fair taxation about collecting the right amount of tax or is it about increasing taxes as a percentage of GDP? This question goes right to the heart of the BEPS project and disappointingly there appears little concensus. If it is about collecting the right amount of tax, then this would mean a change in the payers of tax not the absolute amount of tax as if business paid more tax then presumably individuals would pay less (with tax rate reductions)  and the proportion of tax to GDP would remain roughly the same.

Now this is clearly not what the union representatives want. What they also seem to fail to get is that the way to increase spending on public goods is to encourage growth and the increased tax revenues which growth produces. Indeed they appear suspicious of tax policy whose aim is to foster growth – which is sad and I think misguided.

If we could agree what fair taxation is, I would be happy to support it. Of course taxpayers should pay the tax the tax due, which is why I have consistently advocated making clear what the intention of the law is, because it is the crucial question in any fair taxation. Tax ,for the most part, is raised to fund the public spending of governments, governments make policy decisions about spending and then tax funding decisions , not the other way round. The key objective of the forum should be about making the intention of taxing instruments clear and then making them as efficient as possible. It should not be about the politics of government spending. Fortunately Taxud take this view.

No comments yet.

Leave a Reply