Today, I am travelling to Davos for the World Economic Forum’s Annual Meeting, where this year’s theme is “Stakeholders for a cohesive and sustainable world”. I am going there to talk about (guess what!) tax. As a tax geek, it has in previous years surprised me how little tax has been discussed at Davos given the significant place it has in all economies and that it is a lever governments frequently pull to try and influence behaviors, and also a major factor in many geopolitical and international developments.
However, tax is starting to move up the agenda and several sessions this week will indeed cover tax. There is a great deal to discuss given the current state of play. From my view, there are three key ways in which tax contributes to this year’s theme.
- Firstly, the issue that is most front of mind for many is in regards to climate change and environmental sustainability. The question here is how tax policy can help. Obviously green taxes are not new but are they as effective as they could be? Do they actually drive behaviors in the way intended and do they sometimes risk creating financial dependency on the very thing we want to see disappear?
- This leads on to the second point. How can tax contribute to the sustainable and cohesive economies we need? At a national level issues of “fairness” as between generations and income groups are hotly debated, and as certain jobs are taken over by robots, some are asking whether a new approach to tax is needed to protect employment or redistribute the wealth created by the bots. On the international level, the distribution of taxing rights, especially between developed and developing economies is subject to debate. The hot issue at the moment is taxation of the digital economy, although the proposals currently under discussion at the Organisation for Economic Co-Operation and Development (OECD) are much broader than this. The practical impact of the OECD proposals are still being worked through. And, of course, the possible impediment taxes can create to international trade is demonstrated by the international disputes currently underway.
- The third issue is the cohesion and sustainability of the tax system itself. At both the national and international level, tax laws are becoming more and more complex ― with multiple taxes, a web of reliefs and exemptions and additional charges and countries moving away from previously agreed standards. This is putting a significant burden on business to comply with ever increasing filing and reporting obligations, and on governments, including those in developing countries, to administer. I wonder whether there is a room for a rethink.
Finally, it’s worth saying something about stakeholders. The crowd at Davos contains quite a diverse range of voices. As we have found through the Responsible Tax project, this is a thoroughly good thing. If the challenges to the world are going to be solved, just as for tax, I firmly believe that all stakeholders need to contribute to and be heard in the debate and take action.
No doubt these and other tax-related issues will be further explored in the days ahead. I look forward to being your voice on Tax from Davos over the next week, and welcome your comments, questions and ideas throughout.