Letter in the Financial Times, published 20 December 2010
Sir, Contrary to Michael Skapinker’s fears, a crackdown on corporate tax evasion can be delivered with something less than world government (“Companies face the people’s fury over taxes”, December 14). An international treaty to agree a common tax base would be sufficient, leaving tax rates to competition among the signatories. It can be made to work even without every country in the world signing up.
Crucially, the treaty should provide for an objective definition of which taxable activity falls within which tax jurisdiction, based on the location of production, sales and management, and render the notion of an “official domicile” redundant.
It would be wise for such a treaty to establish a court to adjudicate disputes between member states and companies, and a consultative parliamentary assembly in order to maximise transparency and accountability.
Finally, there is the question of enforcement. This might be better achieved via the taxpayers rather than the tax collectors.
Companies should be invited to declare that they will apply the rules of the treaty in every territory in which they operate, whether or not that territory has itself signed the treaty. Countries that have signed the treaty will therefore be able to collect the amount of tax properly due to them, the continuing existence of tax havens elsewhere in the world notwithstanding. Companies that do not make such a declaration would be ineligible for government contracts, perhaps, and other sanctions might also be necessary in order to bring them to comply.
Chair, Federal Union,
London NW2, UK