[Documentaire] “Tax Wars”: the global tax war

When I was Minister of the Economy, I discovered to what extent termites were eating away at the tax baserecalls Wayne Swan, an Australian politician and member of ICRICT (Independent Commission for the Reform of International Corporate Taxation). Since 2015, this independent institution has brought together a battalion of researchers, senior international officials, magistrates, members of NGOs and former ministers, with the aim of animating the global debate around the taxation of multinational profits, by focusing discussions on the global public interest.

The documentary Tax wars – currently broadcast on Arte – tells the story of this mobilization and the results obtained to date: the agreement of 138 countries (in 2021) for unitary taxation and a global minimum tax. In the European Union, a minimum rate of 15% must be applied to all companies, regardless of the country where they report their profits starting this year. A low tax rate, but a first step. The countries concerned expect this taxation to bring in revenue, some 150 billion dollars in total, to be distributed.

Tax optimisation and evasion: The dramatic loss of revenue for national economies

Until now, through the various arrangements that multinationals can legally implement to benefit from the lowest tax rate (international tax optimization), states, on a global scale, have suffered a loss of some 600 billion dollars. Jepp Koford, a Danish MEP, estimated in 2019 that tax evasion cost to the European Union some 1000 billion euros per year, in concrete terms a shortfall in terms of tax revenue.

The first sequence of the documentary is filmed in France, at Alstom – now General Electric – in Belfort. It looks back at the sale of this industrial flagship to the multinational, the disappearance of profits (and therefore of the participation paid to employees), evacuated to Switzerland where corporate tax is lower, and even on the “leak” of patents, also now registered outside the country, the company therefore having to pay royalties for the use of its own inventions.

Direct consequences on public services

And the impact of this race to the lowest tax bidder does not only weigh on workers’ remuneration. In forty years, OECD countries have practically halved their corporate tax rate (from an average of 45% to 23%). And while, according to the IMF, some $11,000 billion was spent by states to deal with the Covid 19 pandemic, at the same time, multinationals have continued to reap profits, particularly in tax havens. , without ever being requested/constrained by governments for support to national communities. However, summarizes Alex Cobham, economist and executive director of Tax Justice Network, Saving profits in a tax haven has direct consequences in terms of infant mortality and our ability to respond to epidemics.

Tax evasion can therefore have painful consequences, in both developing and developed countries. When public services are only for the poor, they are poor public services.sums up Daniel Bertossa, general secretary of Public Services International (International Federation of Public Service Unions).

By briefly retracing the history of global taxation, this documentary recalls that the United States (which assumed a maximum individual tax rate – on the last bracket of taxed income/marginal rates – up to 81% for the highest income before Ronald Reagan came to power), adopted a unitary taxation system: a rate of 21% must be applied to businesses everywhere. If an American state decides on a lower rate, the federal state collects the share corresponding to the difference in amount resulting from the calculation according to the two rates.

A discreet staging in the style of Star Wars (in only five chapters) adds little to the subject but attempts to give a little lightness to the film. Let us hope that the next episode of the saga will document the implementation of a global system thanks to which the countries of the South will also be winners. A coalition is already working to ensure that the debate takes place at the level of the United Nations.

Tax Warsdirected by Hege Dehli and Xavier Harel, to be seen on Arte.tv until July 4.