Taxes

Fighting tax exile: this is Yann Galut’s aim. This French Socialist representative is at the head of a Committee created in the National Assembly to think out measures against tax exile. The work of this committee should end up in bills introduced in the Parliament as soon as May.

The IREF’s aim is to defend and promote economic freedom and fiscal competition. Our aim goes against the OECD’s last study that was commissioned by the G20 and called “Addressing Base Erosion and Profit Shifting”. It will be presented on February 15th at the G20 Summit in Moscow. The OECD claims that “global solutions are needed to ensure that tax systems do not unduly favour multinational enterprises, leaving citizens and small businesses with bigger tax bills.”

By Alexandre Diehl, Lawyer and IREF research Fellow

For the past few weeks, and as Google has announced “bad” results on the financial markets, the media are gurgling with strange and technical news on a possible tax audit for the company. What is going on? Has Google broken the law, or are the French yet again attacking a success story out of envy? Has the government found another cash-cow?

A petition was submitted by French MPs to the Constitutional Council regarding the limitation on the wealth tax and the new regulations which were to take into account “virtual” incomes.

On 28 November 2012, IREF and the French Taxpayers Association addressed an argumentary (see attachment in French) to the members of the National Assembly, urging them to seize the Constitutional Council in this matter. The MPs replied favourably and passed on the request to the Constitutional Council on 20 December.

Among the many ways to understand the climate of opinion and the culture of a country, looking at its fiscal system is one of the most rewarding. Of course, tax systems almost always rhyme with complexity, each system bearing the weight of its history. But the attempts to change the system and give it a new direction are highly instructive.

To observe changes, debates and new directions in tax systems is precisely what the IREF Yearbook is all about. In that sense the Yearbook is not in direct competition with other annual reports on taxation that typically focus on numbers rather than on the philosophy behind them.

Important determinants of multinational firms’ choice of location include, besides resource cost and infrastructure, the taxation regime through its effects on international pricing and profits. This paper investigates the effects of tax rates on firms’ profits and financing decisions by analyzing a panel of several hundred thousand European firms for the years 1985 to 2010. Results indicate that taxation has a negative effect on overall firm profits but not on returns on shareholder funds.

By Jean-Philippe Delsol

The fiscal frenzy which has seized the French socialists not only means that the economy grinds to a halt. It is attacking the very foundations of society by destroying entrepreneurship and responsibility. Taxes are raining on the people and the promised shelters often disappear before they have even been introduced. The 2013 finance bill has announced confiscatory tax rates on incomes, capital gains, and the payroll taxes will be increased as well. But the socialists are shooting themselves in the foot: such tax rates will destroy wealth and drive out entrepreneurs, capital, businesses and young people. Thus tax revenues will fall.

At his press conference on Tuesday 13 November, François Hollande declared that, “Returning to a balanced budget essentially means looking to spending cuts rather than tax increases. Are we better off with 57 per cent of GDP of public spending, whereas it was 52 per cent five years ago?” He is right. This is common sense coming from a socialist president who set out with a policy of tax hikes, practically without touching public expenditure that is the highest among OECD countries. France spends € 150 bn more than Germany per year. Does that mean that the Germans are less well off? The average public spending in Europe is some 48 per cent of GDP.

The times when Germany was the symbol of fiscal probity seem far away. The German Taxpayers’ Association (BdSt) publishes each year its “Black Book” providing an overview of government waste which makes Darth Vader look like a choirboy in comparison.

The Taxpayers’ Alliance has launched a petition on its website (freezebusinessrates.org) to enable taxpayers to appeal to their members of Parliament on business rates.

Corporate taxation in the United Kingdom rose by 4.6 per cent in 2011, by 5.5 per cent in 2012. Yet the coalition government seems set to implement a further 2.6 per cent hike in April 2013.