Let’s call the workless future we are more or less heading towards Robot World. One of the pillars of Robot World, if it is going to be anything other than a winner-takes-all dystopia of extremes of wealth and poverty, will have to be some sort of international tax regime. I think we can take this as a given, as we are seeing national revenues affected by the fact that global companies — Google and Apple come to mind — find it way too easy to “tax shop” and shift their profits to low- or no-taxing areas of the world, a world which, as a you know, is their oyster.
Without this revenue, governments and citizens simply cannot develop the sort of societies that most of us think of as “first world” or “developed”, which is precisely why we are seeing governments from London to Melbourne looking for ways of punching holes in the welfare safety net and why citizens are increasingly frustrated and angry, no matter what the figures say about average rising wealth.
Thomas Piketty addresses the issue in his book, proposing a global wealth tax of between one and about six percent (depending on circumstances). Even amongst fans of his book, the idea has pretty much been dismissed as naive and impractical. In his review of the book in the LRB, Benjamin Kunkel says bluntly, “Socialist revolution frankly seems more likely.”
And it’s true, you only have to look at the abject failure of nations to be able negotiate anything viable on the issue of cooperation on climate change to understand the difficulties.
Which is why this piece by Germany’s Federal Minister of Finance, Wolfgang Schauble, is pretty interesting.
He thinks a global wealth tax is feasible, and offers the OECD’s Common Reporting Standard as evidence of positive international cooperation. Maybe his views will cheer you up.
Schauble sets out the problem:
Tax legislation has not kept pace with these developments. Most of the tax-allocation principles that apply today date back to a time when doing business internationally primarily meant transporting goods across a border to a neighboring country. But rules that were devised for this in the 1920s and 1930s are no longer suitable for today’s international integration of economic processes and corporate structures. They need to be adapted to the economic reality of digital services.
In the absence of workable rules, states are losing revenue that they urgently need in order to fulfill their responsibilities. At the same time, the issue of fair taxation is becoming more and more pressing, because the number of taxpayers who make an adequate contribution to financing public goods and services is decreasing.
He says, “In today’s world, even large states cannot establish and enforce international frameworks on their own,” but argues that, “Groups of countries still can.”
As evidence of this he offers, “The Seventh Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes” which took place in Berlin this week, “bringing together representatives from 122 countries and jurisdictions, as well as the EU. A joint agreement on the automatic exchange of information on financial accounts was signed on Wednesday.”
Here’s the key section:
The agreement is based on the Common Reporting Standard, which was developed by the OECD. Under the CRS, tax authorities receive information from banks and other financial service providers and automatically share it with tax authorities in other countries. In the future, virtually all of the information connected to a bank account will be reported to the tax authorities of the account holder’s country, including the account holder’s name, balance, interest and dividend income, and capital gains.
Various measures are in place to ensure that banks can identify the beneficial owner and notify the relevant tax authorities accordingly. The CRS thus expands the scope of global, cross-border cooperation among national tax authorities. In this way, we can establish a regulatory framework for the age of globalization.
As I say, this is just one of those issues that will have to be confronted and surmounted if we are going have the tools necessary to cope with the structural changes around work that are currently taking shape and leading us towards Robot World.
Some sort of pan-national tax is an issue I will be returning to a lot.