Crack Down On Tax Avoidance, Don’t Fix Spending Problems

The OECD is releasing an “Action Plan” to “crack down on international tax avoidance, particularly by multi-national companies”.

The head of the OECD thinks that the rise of online commerce and the fact it is harder for global tax authorities to compete against firms who might employ dozens of tax lawyers let alone accountants is a bad thing.

He is borderline insane. The Financial Action Task Force (FATF) has morphed from a pipe dream of anti money laundering conference attendees into changing how literally every participant in the global financial markets must conduct business.

New Zealand recently “updated” its anti money laundering and compliance rules. It will be interesting to see how that plays out over the past few years. A lot of firms -particularly SMEs – have literally no idea how they are now breaking the law by not performing sufficient customer due diligence.

But let’s go back to the OECD and its plan to make information sharing easier for global tax authorities. How on earth can that be a good thing? Here in New Zealand we already have a situation where the law as it exists on paper isn’t the same as how Inland Revenue will actually apply it.

This is not a good thing – tax issues alone are becoming a deterrent to overseas investment in New Zealand. The bleating about big corporates cutting their tax bills forgets that the complainants have not stopped purchasing Apple products or searching the internet with Google.

Focusing on making it easier to extract tax revenue ignores the fact the governments around the world have proven pretty poor managers of the taxes they do raise.

Does it surprise you that so many Greeks don’t pay their taxes? Why would they throw good money after bad when Greek public servants and politicians have basically done nothing except sell out their fellow countrymen?

But if there is one thing that makes me laugh out loud it is this – how many of the people absolutely furious about PRISM and NSA surveillance are cool with tax authorities sharing information to raise more revenue?

What is the difference between “we need surveillance to get the terrorists” and “we need more information-sharing to get tax avoiders”?

Please share your thoughts below. I suppose it’s one of those things where people demonstrate how their thought processes are more to do with what “their team” thinks than consistently applying principles to different policy situations.