HASWhile the global economy is experiencing an unprecedented succession of shocks (health and energy crisis, inflation, geopolitical tensions, slowdown in growth), tax evasion remains prosperous. Tax havens are as welcoming as ever for multinationals looking to avoid taxes. According to the report on global tax evasion, published Monday October 23 by the European Tax Observatory, nearly 1,000 billion euros in profits were recorded in 2022 in these countries practicing ridiculously low tax rates. More than a third of global profits made abroad by these companies are thus exempted from the tax authorities of their country of origin.
Tax optimization mechanisms have continued to grow in recent decades. For States where these companies should logically pay their taxes because they carry out their activity there, the shortfall represents almost 10% of the tax revenue collected globally from companies.
The international community has finally realized that this race to the bottom on taxes was a dead end. The idea that the richest and multinationals do not pay their fair share undermines the social contract and erodes general consent to tax. In addition, these practices deprive States of tax revenues essential to financing their social model and the ecological transition.
Not a fatality
Faced with these challenges, a vast global tax reform, launched under the aegis of the Organization for Economic Cooperation and Development from 2016, initialed by 140 countries in 2021 and approved by the European Union in December 2022, is finally about to enter into force. From now on, regardless of the country in which a multinational declares its profits, they will ultimately be taxed at an identical minimum rate of 15%. Each country retains its sovereign right to set the tax rate it wishes, but, if this is lower than the global minimum tax, the difference may be collected by the States cheated by these practices. Tax havens thus theoretically lose most of their attractiveness.
The reform is far from perfect. The search for a broad consensus has led to the application of a relatively low global tax rate, accompanied by exemptions which limit its scope. This is nevertheless clear progress. Just a few years ago, such a global agreement was simply unimaginable. An assessment of the reform must be established once it has fully entered into force, to highlight its inadequacies and make possible corrective measures. Nevertheless, a global dynamic against tax evasion has been launched.
Concerning wealthy individuals, the automatic exchange of banking information, introduced in 2017, has made it possible to reduce offshore tax evasion. Certainly, in the meantime, other loopholes have taken off, such as real estate investment in a country other than one’s own. Various optimization techniques also continue to allow the ultra-rich to benefit from a very low tax rate compared to the rest of the population.
The road remains long to restore equity to a system that States have allowed to drift for too long. But tax evasion is not inevitable, it is the result of political choices. It is up to public opinion to maintain pressure on leaders to ensure that everyone pays a fair tax.