How to end the inequality crisis? More tax justice

This entry posted by Aurore Chardonnet (@AuroChardon), Oxfam’s EU Policy Advisor on tax and inequality, and Nina Monjean (@Ninamonj), EU Policy Assistant, on 26 January 2018.

An ever more unequal world is unbearable

They say growth is good for everyone. But 82% of all the global wealth created last year went to the top 1%. Meanwhile the bottom half of the world saw no increase at all.

Furthermore, nine out of every ten billionaires are men. Our world is clearly divided and this is a situation that is blatantly unfair and unsustainable.

While the rich are getting richer, governments’ reforms all around the world have brought cuts in corporate income, wealth and property taxes and cuts in public services. The EU is not exempt from this trend, but can have a positive role – if it implements reforms.

Unfair taxation increases the inequality crisis

Who you tax has a big impact on the level of inequality in society. We need tax to finance much-needed public services such as health and education, and taxes should allow a fairer redistribution of income and wealth so that nobody is left behind.

Meanwhile taxes for rich businesses and individuals are being cut in a race to the bottom for which the poorest foot the bill. On average, legally imposed corporate income tax rates in OECD countries decreased by almost a third since 2000, falling from 30.4% to just 22.3% in 2017. Worse, the EU’s digital sector paid on average less than 10% of corporate income taxes, according to the European Commission.

How the EU can make and unmake inequality

Inequality is a purely human-driven process. So, the good news is that what was made can be unmade.

The EU has a leading role to play here. The tax laws of EU countries have significant impacts on other countries, and especially on the poorest. EU states have already made some improvements, endorsing automatic exchange of information on tax issues, adopting anti-money laundering laws and adopting an EU blacklist of tax havens.

But it is not addressing the elephant in the room: tax havens within the EU itself and Europe’s own harmful tax practices. If it is serious about reducing inequality, the EU must also look at its own member states and take measures to fight tax havens within the EU.

Tax transparency cartoon

EU transparency laws can make policies work better for development

The EU’s policies must be coherent with its development objectives. When wealth is disproportionally transferred from developing countries to EU countries thanks to loopholes that allow companies to avoid taxes, it threatens the actual development of those regions. The EU is giving aid, but at the same time is allowing corporations to take much-needed funds from poor countries.

It is the national EU finance ministers who can end that scandal, by implementing a key reform that would require multinationals to disclose where they make profit and where they pay taxes. That would ensure both EU and developing countries get their fair share of tax revenues. A proposal has been on the table since the Panama Papers broke, but some EU member states are resisting it.

If we want to live in a world free from the inequality that affects so many lives, collecting taxes fairly is key. It’s time Europe stopped making the inequality crisis worse, and started acted on solutions.

This entry posted by Aurore Chardonnet (@AuroChardon), Oxfam’s EU Policy Advisor on tax and inequality, and Nina Monjean (@Ninamonj), EU Policy Assistant, on 26 January 2018.

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