$5.7 billion (€4.73bn).
This is how much Jeff Bezos, Amazon CEO, would have paid in federal taxes for 2020 under the proposed wealth tax bill that emerged in the US House of Representatives last week. This is an almost unfathomable figure for us to truly comprehend, but let’s give it a go.
To put this sum into context, the EU agreed to pay an estimated €870m for 300 million doses of the Oxford-AstraZeneca vaccine. If you could strike the same price per dose deal as the EU, €4.73bn could get you 1.63 billion doses of this vaccine. Put simply, Jeff Bezos’ potential federal tax bill could pay to fully vaccinate 10% of the world’s population.
Such immense gains from a 3% tax on one individual’s income make this kind of wealth tax an obviously good idea. Here in Europe, only a handful of countries impose wealth taxes and Spain is the only EU Member State that has a tax on an individual’s net wealth.
The EU’s attitude toward taxes is perhaps best represented by its tax haven blacklist, a truly wonderful example of the bloc’s ability to turn a blind eye to its own Member States’ shortcomings.
What is the ‘tax haven blacklist’?
The EU’s list of non-cooperative tax jurisdictions, also known as the EU’s tax haven blacklist, was established in 2017 to identify and scrutinise jurisdictions that allow for tax abuse and unfair tax competition.
Tax havens allow for little to no tax liability, costing governments hundreds of billions of Euros per year in lost corporate tax revenue. This lost revenue – which is not actually lost, but instead remains in the accounts of the wealthy elite – augments inequality and also allows non-taxpaying billionaires to present themselves as faux-philanthropists.
Updated twice per year, the list aims to expose countries’ dishonest tax practices and even allows for sanctions to be imposed against countries that fail to meet certain criteria. A country makes its way onto the list by demonstrating a lack of transparency, a lack of fair tax competition and a failure to implement the OECD’s Base Erosion and Profit Shifting minimum standards (BEPS).
Essentially, the list points out which territories allow questionable, and sometimes illegal, tax practices and proposes penalties for these territories if they do not commit to fixing the problems in their tax systems.
This sounds like a brilliant way for the EU to expose tax havens and to direct the worldwide community towards fair tax practices and, in turn, lessen economic inequality.
A problem would arise, however, if the EU were to ignore the tax havens within the Union. This, unfortunately – and rather predictably – is exactly what the EU has done, resulting in a tax haven blacklist that stinks of hypocrisy and insincerity.
Do as we say, not as we do
With national tax policy excluded from EU treaties, individual Member States control their own corporate tax rates. Within the EU, several countries have been cited as having the characteristics of tax havens: Malta, Cyprus, The Netherlands, Luxembourg and Ireland.
With almost one-fifth of EU Member States displaying indicators typical of tax havens, the EU’s blacklist represents astounding hypocrisy on the part of the EU. Why should any other nation listen to the EU’s calls for tax reform, when they cannot even guarantee that their own Member States meet the same standards?
Let’s look at Luxembourg. A recent exposé claimed that the tiny landlocked nation of 626,000 residents is home to 55,000 offshore companies managing assets worth at least €6 trillion. According to the report, these companies are phantom companies, meaning they have neither offices nor employees, and an estimated 90% of them are controlled by non-Luxembourgers.
Shifting our focus to Ireland, last year the Irish State was relieved when a European Commission decision was overturned, meaning Apple did not have to pay €13.1bn in back taxes. While this may seem counter-intuitive, the Irish government knew that their effective tax rate, which, for giants like Apple, works out much lower than the standard 12.5%, will be worth more to them in the long run than forcing one of BigTech to adhere to their taxation responsibilities.
As you can see, we have more than enough issues with tax havens in the EU and some of our closest neighbours – Switzerland, Andorra, Lichtenstein– have managed to wriggle their way off of the blacklist, in spite of their well-known, aggressive tax planning tactics.
Lead and others will follow
What needs to be done to address the glaring hypocrisy that is the EU’s tax haven blacklist? Thankfully, in January 2021, the European Parliament passed a resolution to revamp the blacklist.
Some proposed reforms include a widening of the criteria that can land a country on the blacklist, the inclusion of Member States on the list, and keeping countries on the list if they make only symbolic changes to their tax systems.
As we all know, the economic downturn prompted by the Covid-19 pandemic is only just beginning. Never has there been a more important time for governments to have taxpayer money at their disposal. Imagine the collective feeling of hope there would be in Ireland right now, if their government had received the €13.1bn Apple payout to help with the €19bn budget deficit from 2020.
The EU can no longer ignore the local and peripheral tax havens while continuing to demand conformity from the rest of the world. A robust mechanism is needed at the European level to enforce proper tax practices upon Member States. Perhaps the recently passed resolution is this mechanism.
Unfortunately, unanimity amongst EU Member States is required for the resolution to come into force and the likelihood of countries like The Netherlands or Luxembourg agreeing to such a motion is, much like Jeff Bezos’ potential tax bill, unimaginable.