Progress in the Fight Against Tax Evasion
Political scientists at the University of Bamberg show the efficacy of OECD measures
Evading the taxman is harder than it used to be. According to a University of Bamberg research group headed by political science professor Thomas Rixen, one anti-evasion measure has proven itself particularly effective: automatic exchange of account information. The OECD (Organisation for Economic Co-operation and Development) established the measure in 2017, and it obligates financial institutions in nearly 100 countries to automatically notify investors’ home countries of any capital income.
The study is one segment of “Combating Fiscal Fraud and Empowering Regulators” (COFFERS), a project that the European Union has funded with nearly five million euros as part of its “Horizon 2020” programme. Working with researchers from eight other European universities since November 2016, Rixen and his University of Bamberg colleagues Lukas Hakelberg, Leo Ahrens and Fabio Bothner have been researching ways to combat tax evasion and avoidance.
Summarising the findings that the University of Bamberg political scientists have compiled in their empirical analyses of tax policy development in the 35 OECD countries, Rixen states simply that “Increased transparency created by the automatic exchange of information results in higher taxes on capital.” He explains that many countries had lowered taxes on capital assets in order to survive international tax competition. The automatic exchange of account information has meant that these countries receive their rightful capital taxes and have the opportunity to raise them again. “They gain democratic manoeuvring room rather than having bow to the imperatives of tax competition,” says Rixen. The additional money could be diverted into better public goods like infrastructure or social services, because, as Rixen puts it, “According to one calculation, tax havens are causing EU countries to lose tax revenue amounting to one half of public education expenditures.”
The Bamberg research team has now provided the EU with recommendations on how the positive effects of automatic account information exchange can be enhanced. These include things like expanding the number of countries who obligate themselves to participate and expanding the scope of reporting beyond financial assets to include real estate, gold and other diverse assets. “We know that the super-rich are particularly able to exploit these loopholes. It’s problematic when the very group whose strong shoulders should be bearing a majority of the tax burden can continue to evade its taxes.”
For further information please visit: http://coffers.eu/
Thomas Rixen discusses his study’s background and findings in this detailed, German-language interview: www.uni-bamberg.de/news/artikel/steuerhinterziehung
Prof. Dr. Thomas Rixen
Professor of Public Policy