The initial global Roundtable on Responsible Tax was held in Paris on 13 January 2017. Provocations on the global state of tax were offered by Pascal Saint Amans, Director, Centre for Tax Policy and Adminstration, OECD and Manal Corwin, National Leader for International Tax, KPMG.
A full list of participants is attached. Consensus was that the Responsible Tax movement is an important contributor to a better and more progressive conversation on tax and tax advisory in an otherwise uncertain and fragile world.
In order to progress, the dialogue on responsible tax needs to continue to gain traction and critical mass – it is important to keep the conversation and the listening going. The GRT initiative will benefit from bringing in voices from the rest of the world, and for multiple stakeholders to explore the space moving forward, focusing on specific areas with common purpose.
To enable an effective dialogue, it is important to separate tax planning / avoidance from tax evasion / criminal behaviour and to think outside the box when suggesting new ways forward. It is important to focus on tax decision-makers and their advisors, involve intermediaries and recognise that the responsible tax agenda will be delivered by a combination of business, government and other stakeholders. NGOs and MNCs need to realise the power they hold in this debate and concentrate on creating a positive discussion on tax. Anyone has the opportunity to contribute to the conversation online.
The Paris meeting was the first global Roundtable in the series, following a successful UK pilot. It was convened by Jericho and KPMG and included 20 stakeholders representing politics, business, advisory, NGOs, think-tanks, academia and world bodies. Its core purpose was to identify the key issues impacting Responsible Tax on a global level – and the priorities in terms of actions to address these issues. Further context was provided by the recent inauguration of a new US president and the challenges posed by Brexit. This initial group also recommended Future participants as well as key themes in the Responsible Tax programme.
Held under the Chatham House Rule, the conversation had as its central provocation:
Hopes and aspirations for Responsible Tax in a post-Brexit, post-Trump, post-BEPS world**.**
As detailed in the opening remarks, the premise behind the meeting – and the GRT project – is that the future on tax policy, and the role of those implementing it, must be negotiated, not defined. Business, policy-makers and grassroots stakeholders must have equal voice. The inaugural roundtable initiated conversation between these groups, to build trust, respect and awareness of different points of view, and to identify common goals – only then can progress be made.
Preserving the principle of non-attribution, and without editorialising, the below provides a high-level overview of comments and contributions on the current political context and issues stakeholders in the GRT initiative seek to align on. Subsequent meetings focused on specific issues related to the GRT movement – you can see an overview of Responsible Tax and the Developing World discussion, held in April, or keep abreast of other discussions here.
Key areas of focus for the GRT project
The group started by individually summarising their key aspirations for the Responsible Tax project – related to their areas of expertise, broadly listed under the following themes:
1. Review approaches to tax
- We have been too focussed on revenue collection, the debate needs to extend also to distribution.
- It is the role of governments to take responsibility for policy impacts at the domestic, EU and supra-national levels.
- Think about changing the system – eg the conversation needs to move to taxing resources, rather than focussing just on labour.
- Create a fair, positively-impactful tax system that accounts for nuances and complexity
- Compliance in an ever-changing world of Country v OECD v EU conflicts make it very difficult for business.
- While a common definition of Responsible Tax is needed, an understanding is also needed on what Responsible Tax looks like in different countries and in different contexts, and on the role of national and pan-national organisations in making it happen.
- There should be the culture and space to negotiate, rather than impose, a responsible system.
- **Stamp-out ‘bad’ tax practice **
- There needs to be a way of combatting wealth managers contributing to inequalities in the system.
- Given the political economy of taxation – there is significant discontent and advisors need to act with great care to retain their license to operate.
- The debate still too often fails to make a clear and fair distinction between criminal activity and tax avoidance.
- Business can play a strong role in preventing a race to the bottom on tax.
- We all need to learn how to be responsible. The law is the floor. We need to learn how and when we should go above and beyond its demands.
4.** Initiate a broader, more inclusive discussion on tax **
- The conversation must happen outside of the ‘tax bubble’.
- Some business leaders have kept out of the discussion, they must engage.
- The Responsible Tax project needs to work for those who have the most to lose – and who currently have limited power and voice in the debate. We need to know who is responsible for responsible tax: governments, civil society and business? Actual responsibility needs to be predictable and secure. Clear leadership and action is required. Principles need to be translated into practice. Implementation is imperative. moving from agreeing on good ideas to legislating is of utmost importance.
Are we entering a period where there is more conflict and less consensus?
- Tax remains very high up the international agenda– for example you cannot have a sustainable Europe with high levels of economic and social divergence.
- Equally the spotlight needs to be shone on developing countries and how to build a tax system that works for them.
- There is an appreciation that civil society too needs to rebuild their trust in the system.
- A financial system that has used tax havens is threatening capitalism. Capital needs to flow for capitalism to work. Co-operation is needed, e.g. there has been lack of movement by the UK government to move forward on the register of beneficial ownership in overseas territories.
- The EU has definitely made progress in this debate. Germany plays a huge role in EU policy. Again, business needs to have a louder voice in the debate alongside policy-makers.
- Post-war, there was a convergence towards big nations developing systems that created greater equality. That has now broken down. Neither the bureaucratic state nor the free-market hold all the answer. That is why we need negotiated settlements across government, business and civil society.
- A pivot point has been reached – this needs to be addressed openly.
Following the US election - what are the specific contextual issues of the RT agenda? NB conversation took place January 2017
- There is a move to protectionism, with strong pressures to move to a more territorial system. The border adjustment tax is causing significant concern, and some see it as evidence of an ‘America first’ approach.
- BEPS has shifted behaviour. We need to recognise and build on the progress in the project, however anti – BEPS sentiment still exists with certain US politicians. US tax reform will have not eliminate BEPS considerations, but may change its impact in some respects make it less significant.
- US tax reform is looming and there is significant change to come - US tax reform likely will result in a reduction in the corporate tax rate and a broadening of the base.
- The blueprint in the House is a starting point. However, Trump’s plans are unclear and may differ from the blueprint.
- Is it possible to have trust in the system if there is a lack of transparency? There has to be evidence i.e. public country-by-country reporting.
- If there is no free movement of information, capitalism will be destroyed as it becomes less and less legitimate.
- Others argue we only need so much transparency and solely to see if there is compliance.
- Greater transparency and country-by-country reporting has gone a long way and it has had an impact. The key is that there is enough information to assess risk, but the information should not be used to form opinions. That would do more harm than good and distract from the real issues. Too much public information does not always help. Being transparent for transparency’s sake may confuse more than it enlightens.
- To progress with the debate on transparency, more needs to be done on exchange of information. Panama papers has been not solely about tax – if anything it was more about money laundering.
- But there is pushback on full disclosure eg a French court case has ruled that public country-by-country reporting would violate the human rights of entrepreneurs.
- There is a need to find a balance of transparency. What do we need so we can trust tax authorities to do their job without being overwhelmed?
- There needs also to be a balance on public country-by-country reporting. We have to avoid the tyranny of transparency. The most important point is we get the level of information required correct.
- The bigger question than just transparency is building a tax system that is fit for the future. To do this we need to listen to voices not just in Northern Europe but also in America and rest of the world.
European/ Global policy
- There needs to be a big rethink on and in Europe and how responsible tax reform will help and agreement on a European wide basis for joint action to re-enact social and economic convergence.
- In specific terms, there is a link between tax and money laundering, and a need to register foreign companies that have relationships with the EU as part of any re-think.
- There needs to be a framework to discuss responsible tax behaviour, not just in Europe and the US, but Africa and Asia as well.
Wider context of the GRT debate
- Unless people know what is happening, they will reject any reforms. Definition is needed on the role of tax advisors, business and government in all of this.
- Political will to change is needed for a reliable tax system to be implemented.
- Are these just tax issues, or more broad regulatory issues?
- We need to agree on common goals, like the environment, and then develop an international system to deliver on those goals.
- It is important that governments are in the room and listening to conversations like this one.
Reflections/ conclusions on role of GRT initiative
- How can we build a system that works both domestically and globally when there is a lack of cooperation? Any system that is developed needs to be neutral, to ensure choices are clear. An efficient tax system means there is an efficient method to make choices. What is the capacity for us to rise to the challenge of creating such a system? Identify what is working and what is not: First point is that BEPS 2 is not going to work. There is no need to reinvent the wheel. Let’s identify the issues and then work on solutions, rather than destroying all the progress made.
- There are sources of pessimism – US tax reform v European (re) action are the main causes for concern.
- There are sources of optimism. There has been significant progress on cooperation, even given the rise of protectionism.
Some of the questions/thoughts for consideration at future roundtable, events and on the site:
- Is this the end of Transfer Pricing?
- How can Responsible Tax flourish during a global movement towards nationalism (the ‘race to the bottom’)
- Rebalancing capital and labour – how can tax help?
- The meeting concluded with some challenging thoughts and questions:
- Could Brexit in fact provide a unique opportunity for real reform?
- What new “tribes” and new alliances (globally) are likely to emerge in the future of tax?
- Will transparency effectively become a tyranny in itself?
- Might the answers for the future (and co-operation) lie in countries beyond Europe and the US?
Participants agreed to keep the conversation(s) going and to identify prospective contributors and topic areas.