“A reform is a process and not an event”, explained Kofi Annan, Secretary General of the United Nations (1997-2006). When reforming international taxation, this sentence makes perfect sense.
From the 1980s, the opening up of national economies to the world, the rise of trade liberalization policies and the free movement of capital gradually strengthened the reign of globalization. However, as evidenced by the documentary Fast and Dangerous: A Tax Race to the Abyss, economic and financial globalization has progressed without regard to tax competition between states to attract multinational companies.
No measure had been planned to avoid this tax race to the bottom and allow multinationals to considerably reduce their tax rate and thus avoid their fair contribution to the common good.
Forty years later, after intense negotiations, economic summits and international conferences, the great leaders of global tax reform, under the leadership of the Organization for Economic Co-operation and Development (OECD), have achieved success. inconceivable: the conclusion of a declaration that establishes a new framework for the reform of international taxation, namely the establishment of a minimum tax rate of 15% from 2023.
The establishment of the global minimum tax for large multinationals is certainly a historic tax reform which tackles the heart of the problem of tax exemption for multinationals.
But, much more, it is about a substantial effort to close the breach left opened by the globalization which developed by ignoring the tax competition which it generated between the countries. International tax competition had reached such an acuteness that there was even talk of a tax war between countries.
Minimum tax threshold
TaxCOOP was founded in Quebec in 2014 by three Quebec women. When TaxCOOP launched its series of international conferences devoted to the problem of tax competition, the solution of a minimum tax threshold was immediately mentioned. However, there was little hope then that a comprehensive solution could emerge from a political consensus.
By highlighting the injustices generated by tax competition, TaxCOOP has contributed to widely open discussions on the international scene and in particular at the World Bank, the United Nations and the OECD and at the COP25 in Madrid. .
The problem of international tax competition is now recognized and integrated into the action plan for international tax reform. By organizing annual international summits, publishing books and creating documentaries that are broadcast around the world, TaxCOOP has accomplished its mission with the support of the Government of Quebec and the Government of Canada.
In 2021, 137 countries and jurisdictions bringing together 6 billion people and 90% of global economic activity have adhered to the principle of the global minimum tax which will be applied from 2023. The impossible has become possible. You had to believe it.
However, international tax reform is only just beginning and the next challenges for advancing tax justice are immense. First, it will gradually increase the overall minimum tax threshold. But there is more.
The fair share of billionaires
The time has come for billionaires to finally pay their fair share of taxes. In a global society grappling with the challenges of the present times, it is unacceptable for the super rich to pay taxes at effective rates lower than those of their secretaries, in the words of Warren Buffett.
Aggressive tax planning has had its day. The obligation to pay one’s fair share of taxes must be elevated to the rank of a moral principle.
In addition, the taxation of charity deserves a scrutiny. Over a trillion dollars are accumulated in private charitable foundations across North America. We have a duty to revise the eligibility and control criteria to ensure that these foundations are truly charitable and not sophisticated fiscal vehicles. Note that in Canada, charitable foundations are mainly subsidized by taxpayers’ money.
Finally, international taxation must be able to meet the challenges of the environmental war which is now shaking planet Earth. We can and must act. Taxation is a very effective tool to encourage changes in polluting behavior. The introduction of harmonized taxation to target the carbon footprint of individuals must be considered immediately.
The future
Building on the early stages of global tax reform will be essential to initiate environmental tax reform. Negotiation and mediation remain the best tools to obtain the participation and support of a critical mass of countries in order to stop global warming since greenhouse gases have no borders. The establishment of a high-level coordinated mechanism to bring countries together, as was the case with the global minimum tax, should be immediately explored.
The taxation of women, families, SMEs, robots, cyberspace and space are areas that must be studied and adapted to the evolution of societies.
History shows that people have always tended towards more egalitarian societies. Tax justice is one of the attributes of economic equality. Gone are the days of hermetic and opaque tax systems. A whole generation of thinkers, academics, journalists, whistleblowers and private and public decision-makers are helping to demystify taxation and make it possible to rethink tax justice in the 21st century.e century.
* Co-signatories: Lyne Latulippe, professor of taxation at the University of Sherbrooke, principal researcher at the Research Chair in Taxation and Public Finance, co-founder of TaxCOOP; Louise Otis, international administrative judge, arbitrator and mediator, co-founder of TaxCOOP