Equitable, efficient and simple for the Administration (in charge of its application) and for the taxpayer (obliged to comply with taxes). These are the main tax principles. They are not small, so that, in the end, we end up having the taxes that we have: something fair, something efficient and not at all simple. But this could change.
The technology evolves inexorably, which is negative for the fiscal capacity of the governments. For example, digitization implies that certain businesses do not need a significant physical presence in a certain territory to generate benefits (for example, the download of digital services or the purchase of goods over the Internet). The dilution of the territory-benefits nexus supposes that certain countries (where the sales are made) lose revenue from corporate tax at the expense of the countries where the parent company is located. And, not by chance, the matrix is usually located in low tax countries. In the end, the global collection suffers and corporate tax does not play the role that, mainly, should play in our tax system: to be a mechanism of withholding taxes that, in the end, should be paid by shareholders.
Paradoxically, technology can also help. Thus, there are authors who propose the creation of an international financial register (of the returns and valuation of share packages) that allows identification of the place of residence of the shareholder. In this way, the shareholder – less mobile than a multinational – would end up paying according to their economic capacity and, on a global scale, the collection would rebound. In the same sense, the extensive use of plastic money (credit cards) should facilitate control of bases both VAT and income of companies and self-employed.
At present, while the advantages for the public sector are not fully exploited, the disadvantages are there. For example, we know that 40% of the profits of multinationals end up paying taxes in countries with low taxation. It is because of that The Economist It concluded in a recent article that fiscal systems are anchored in the past. Probably, more than anchored, because I believe that the Administrations are well aware of these opportunities, are in a impasse
The fiscal capacity of the public sector will increase greatly when it takes advantage of all the technological advantages. At that time, fiscal policy decisions will become more important, as these will not be mediated by the existence of tax evasion or avoidance. If, then, the public sector does not respond as it should (efficient management of resources), those who are not willing to pay taxes will only have one option: relocate. And, at that point, the only option will be fiscal harmonization. Or this, or a better process of accountability in a globalized world. That is the future -optimist, but where challenges will continue to exist- that I envision for our fiscal system, and for our public sector in general.
Alejandro Esteller-Moré He is Professor of Economics at the University of Barcelona.