Joseph Stiglitz, winner of the Nobel Memorial Prize in Economic Science and former adviser to the government of Panama, has called for high taxation standards at international level and tough measures against any country refusing to apply them.
At a hearing with members of the European Parliament committee of investigation into the Panama Papers scandal on Wednesday 16 November, he said that it should be illegal for banks to do business with other banks registered in countries that do not respect these standards.
He also called for public registers of beneficial owners and steep sanctions for those who promote aggressive tax planning schemes. The Commission is currently reflecting on the issue.
In Europe as well, and in the United States, there are “jurisdictions that do not comply with what I would say is a good norm. The EU needs strong actions domestically and to apply pressure” externally, he said. In his written responses sent to the MEPS ahead of the session, he also stressed that the US as well as two European countries (Luxembourg and Germany), were on the financial opacity index of the Tax Justice Network.
The American problem could be made worse by the arrival of Donald Trump in the White House, he added. If the American President is "tax evader in chief", it is hard to predict the direction the US will go in, he explained. In his written responses, he also said that the future of country-by-country reporting to tax administrations is uncertain, with the aggressive lobbying of business and Trump himself.
He went on to explain that he feels that a 0% corporate tax rate should be criticised in the framework of tax competition. He argued that a zero corporate tax rate means that the burden of taxation will have to be borne by someone else, which is unfair and ineffective. A zero rate in itself is not in all cases wrong, but it raises questions. He stressed that in certain cases, it can be tied to employment, but that in the case of Apple in Ireland, very few jobs were created. He went on to say that he was in favour of a minimum taxation rate.
Paying a fair share of tax is the "most important aspect of social responsibility" and it is not up to companies to "decide whether they pay or comply with the law", he explained. He stressed that growth remained sluggish once a situation arose in which there was little room in the public budgets for investment, precisely due to a lack of resources.
He also said that countries in which whistle-blowers can end up in prison should be included on a blacklist of tax havens.
When called upon to comment on the fact that the former Prime Minister of Luxembourg, Jean-Claude Juncker, is now President of the Commission, Stiglitz replied that the fact that the institution is headed by the "architect of the tax avoidance scheme which actually posed costs on other countries is obviously problematic", but at the same time, it has increased the focus on the Commission.
Specific clauses related to tax transparency should be included in the trade agreements between the EU and third countries, Stiglitz concluded. (Original version in French by Élodie Lamer)