There is no green revolution without tax justice
There's a green wave sweeping through European Parliament. But meaningful action on issues like climate change cannot be achieved without countries rewriting corporate tax law.
JUL 02, 2019
The “green wave” recorded during the European elections on 26 May should give Europe momentum. It is now time we demonstrate our determination to build a social, democratic and ecological Europe, against the withdrawal desires of nationalists and Eurosceptics and the temptations of the status quo offered by Conservatives and Liberals.
The strong mobilisation of young people on the issue of climate gives me particular hope for the future. In France and Germany, the Greens were the highest-ranked party among the 18-34 demographic in this election. And though high school students cannot yet vote, they are already expressing their willingness to defend their future on the streets during the climate marches.
As my mandate as a European MP ends after 10 years of fighting, I want to tell these young mobilised people from Europe and the rest of the world that it is up to them to take up the torch.
I also want to convince them that there is no green revolution without tax justice.
First, because there is a direct link between environmental degradation and tax evasion. Take illegal fishing or logging, for example. The income from this trafficking is clearly not invested in savings banks; it is hidden in tax havens. Secondly, countries must have more resources to finance the ecological transition we are calling for, and, for this reason, multinationals must pay their fair share of taxes.
We must put an end to aggressive tax optimisation strategies that allow massive corporations to pay little or no taxes despite record profits. That Google, for example, paid only $26.5 million in Australia while declaring a $4.3 billion profit in 2018 is outrageous. In Australia, though there has been more transparency about company tax data since a 2014 reform, about one-third of large Australian companies pay no tax, even though they made a gross profit.
For 10 years, I have made tax justice a priority in the European Parliament. I now leave my position with a mixture of satisfaction and bitterness.
Satisfaction first, because we have achieved important victories. Whistleblowers, who defend the general interest at the risk of their own lives, will now benefit from European protection. Financial crime will be better attacked through the creation of a European Public Prosecutor’s Office to coordinate cross-border investigations. Moreover, the European Union has finally required intermediaries — such as banks and tax lawyers — to transmit the plans they draw up on behalf of their clients to the authorities.
The bitterness is there, however, because there is still so much to be done. The proposal for tax transparency for multinationals is still blocked by Member State governments. Above all, I regret that Europe has not yet adopted unitary taxation of multinationals, which would impose taxes on companies as if they were a single entity, rather than as a myriad of so-called independent subsidiaries that they claim to be. This would put an end to the sleight of hand that allows companies to declare their profits wherever they want, with the sole purpose of paying almost no tax.
This system, which benefits a handful of cheating states — notably Ireland, the Netherlands and Luxembourg in the European Union, and Singapore in Asia — harms everyone else. It also engages our responsibility towards developing countries. A 2014 Oxfam report estimated that nearly $19 billion in corporate tax was being hidden by Australian-based multinationals across various tax havens. Of this total, the Australian economy loses out on $5 to $6 billion in corporate tax revenue annually, while developing countries are deprived of nearly $3 billion in much needed funds that could go towards essential services. Without transparency and unitary taxation, multinationals will be able to continue plundering poor countries from the south.
On May 31, in Paris, 129 countries agreed on the need to change global tax rules and prevent multinationals from declaring their profits — and associated taxes — wherever they want. In other words, they decided that multinationals should be considered as single entities. It is a revolution that we have been defending worldwide within the Independent Commission for the Reform of International Corporate Taxation (ICRICT). Of course, the political battles have only just started, because interests diverge considerably among the 129 states.
For 10 years, I have defended the vision of a fairer Europe. A Europe that puts an end to the impunity of the powerful. I have acted for a Europe that defends the general interest rather than multinationals. And while it is time for developing countries to take their seat at the table and make their voices heard, Europe needs to lead the way in the fight for a world more respectful of the environment, justice and solidarity. So does Australia.
Eva Joly is a Member of the European Parliament (MEP) and a member of the Independent Commission for the Reform of International Corporate Taxation (ICRICT).