Berto Jongman: EU Loses One Trillion a Year to Tax Evasion — Comment on the Tax Gap, the Information-Sharing Gap, and the Legitimacy Gap

Ethics, Government
Berto Jongman
Berto Jongman

EU tax: Barroso urges full automatic exchange of data

The head of the European Commission has told the European Parliament he wants EU-wide exchange of income data as part of the fight against tax evasion.

Jose Manuel Barroso said he would urge Wednesday’s summit of EU leaders to support automatic exchange of people’s earnings data between tax authorities.

Tax evasion costs EU states 1tn euros ($1.3tn; £0.85tn) a year, more than was spent on healthcare in 2008.

MEPs are expected to call for a Europe-wide blacklist of tax havens.

Pressure is likely to be put on Switzerland to relax banking secrecy amid anger over revelations about Greek and French politicians holding secret Swiss bank accounts.

The debate comes a day after UK Prime Minister David Cameron urged British overseas territories which operate low-tax regimes to “get their house in order” and sign up to international treaties on tax.

Mr Barroso said he wanted to see the principle of automatic exchange “become the standard at international level as well”.

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Phi Beta Iota:  There is a huge tax gap for two reasons, first, because governments are very poor (or corrupt) about keeping businesses accountable, and second because those avoiding taxes do not believe they are receiving fair value from the government for their payments.  The Nordics are a good example of countries with high taxes, relatively low avoidance, and very high legitmacy in the eyes of their citizens.  The EU and the USA do not enjoy similar legitimacy — indeed, there is growing outrage over how the USA has borrowed one trillion dollars a year since 1980, to allow the two-party duopoly in the USA to stay in power while spending recklessly.  If the EU — and the USA — impose strict information sharing requirements — WITHOUT FIRST ADDRESSING THE LEGITIMACY GAP — they will not achieve the desired results and they will see a flood of renounced citizens and moved corporations.  They will make the problem worse.  Missing from both the EU and the USA strategic discussion is what intelligence and information technology professionals call the requirements definition phrase.  Governments are completely out of touch with what their citizens actually need and want, and they are completely beholden to financial interests that have misdirected the public purse in treasonous ways.  With the exception of the Nordics and The Netherlands, no Western government is remotely close to being “legitimate” in the eyes of a majority of its citizens.  The EU must FIRST address the legitimacy question, in tandem with the needs questions, and only then can it move toward a new interactive informaton-sharing arrangment in which transparency on the part of the government, and responsiveness on the part of the government, elicit a reduction in tax avoidance.  On its present path — allowing the banks to continue destroying entire countries and allowing the USA to destabilize the Middle East and portions of Africa, the Caucasus, and Central Asia — we consider the near-term prospects of the EU in the tax collection arena to be near zero.  On a POSITIVE NOTE: the EU, NATO, and the regional associations from Africa to each of the surrounding areas (e.g. the Baltics, Caucasus, and Middle East) have a once-in-a-lifetime opportunity to change the game — to dump the Epoch A system that is not working and implement the Epoch B system that is proven and can scale rapidly.

See Also:

2013 Intelligence Future — The Third Era of Local to Global Intelligence Robert Steele Overview & Workshop 2.7