Who is stealing our future? Richard Murphy Professor of Practice in International Political Economy, City, University of London Brussels 19 September 2018
The tax gap • The tax not collected by choice • Uncollected taxes • Like wealth taxes • Land value taxes, etc.
• The taxes not elected because of abuse • Evasion • Avoidance
• The taxes not collected because of admin failings • Bad debt • Simple failure to ask because of a shortage of resources
Is it all multinational corporations and the wealthy? • MNCs may be US$500 billion worldwide of which very little might be in the EU (Cobham and Jansky 2017) • The wealthy might evade 25% of their taxes and the rest 5% (Zucman et al, 2018) • These are not enough to explain the tax gap
So what is the size of the EU shadow economy? • • • • •
Estimates of the EU shadow economy in 2015: €2.23 trn (Medina and Schneider 2017) €2.49 trn (Rackowski 2015) €2.21 trn (Based on the EU VAT gap data from EC) €2.33 trn Average
The size of the tax gap • Grossing up GDP for the missing economy and averaging the missing economy estimates the EU tax evasion gap may be €890bn a year • That excludes losses to avoidance • And all losses to taxes not on bases in GDP, e.g, wealth, capital gains, inheritance and land value • So the real total is now well over €1 trn • And most will be domestic tax evasion
What can we do about? • Make better estimates of the tax lost, and why • Prepare proper domestic and international spillover analyses for each country to identify where tax risks really are • Tackle chromic under-resourcing of tax authorities and company registries • Build the obviously true narrative that beating the tax gap is a pre-condition to a fair common market and is not antibusiness at all • Persuade our politicians to act • It is a political failure that we still have such a large tax gap