pandora papers

Albany Wiseman, Soho Square, 1974
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By THOMAS PIKETTY*

By renouncing any ambition in terms of fiscal sovereignty and social justice, we only encourage the separatism of the richest

After the “LuxLeaks” in 2014, the “Panama Papers” in 2016, the “Paradise Papers” in 2017, the revelations of the “Pandora Papers”, resulting from a new leak of 12 million offshore finance documents, show how much wealthier people continue to evade taxes. Contrary to what is sometimes claimed, there is no reliable indicator that allows us to say that the situation has improved over the last ten years. Before the summer, the website ProPublica had revealed[I] that American billionaires paid almost no taxes compared to their enrichment and what the rest of the population pays. Second Challenges, the first 500 French fortunes jumped from 210 billion euros to more than 730 billion euros between 2010 and 2020, and everything indicates that the taxes paid by these great fortunes (information quite simple, but which the public authorities still refuse to publish) have been extremely low. Should we simply wait for the next leaks, or is it not time for the media and citizens to formulate a platform for action and put pressure on governments to tackle the problem systematically?

The basic problem is that we continue, at the beginning of the XNUMXst century, to register and tax assets only on the basis of real estate, using the methods and registers established in the beginning of the XNUMXth century. If we do not create the means to change this state of affairs, the scandals will continue, with the risk of a slow disintegration of our social and fiscal pact and the inexorable rise of each one for himself.

contributory capacity

What is important is that the registration and taxation of property have always been closely linked. First, because registering property gives the owner an advantage (that of benefiting from the protection of the legal system) and, second, because only a minimum tax can make registration truly obligatory and systematic. Let us add that the ownership of assets is also an indicator of people's ability to pay, which explains why the taxation of assets has always played a central role in modern tax systems, in addition to the taxation that weighs on income flows (a flow that sometimes times can be manipulated downwards, in particular for very high assets, as demonstrated by ProPublica).

By establishing a centralized registry for all real estate, both for housing and for professional goods (agricultural land, shops, factories, etc.), the French Revolution instituted in the same gesture a tax system on transactions (transmission rights still in force today ) and, above all, on property (with property tax). In France, as in the United States and in almost all rich countries, the property tax, or its Anglo-Saxon equivalent, the property tax, continues to represent the main tax on wealth (about 2% of GDP, approximately 40 billion euros of annual income in France). On the other hand, the absence of such a system of registration and taxation of real estate and professional properties explains, in many countries of the South, the hypertrophy of the informal sector and the subsequent difficulties in implementing income taxation.

The Separatism of the Rich

The problem is that this system of recording and taxing assets has hardly changed in two centuries, while financial assets have taken on overwhelming importance. The result is an extremely unfair and unequal system. If you own a home or professional property worth €300.000, and you are in debt for €290.000, then you will pay the same property tax as a person who inherited an equivalent asset and has, in addition, a financial portfolio of €3. million euros. No principle, no economic reasoning can justify such a violently regressive tax system (small estates actually pay an effective rate structurally higher than that of the highest ones), besides the fact that it is assumed that it would be impossible to register financial assets. Well, this is not a technical impossibility, but a political choice: we chose to privatize the registration of financial securities (with central depositories governed by private law, such as Clearstream or Eurostream) and then establish the free movement of capital guaranteed by the States , without any prior fiscal coordination.

The “Pandora Papers” also point out that the richest manage to avoid taxes on their properties, transforming them into financial securities domiciled offshore, as shown by the case of the Blair couple and their €7 million house in London (400.000 euros in mutations avoided) or villages on the Côte d'Azur controlled through shell companies by Czech Prime Minister Andrej Babis.

What to do? The priority should be the establishment of a public financial register and the minimum taxation of all assets, if only to produce objective information about them. Each country can immediately move in this direction, requiring all companies holding or operating assets in its territory to disclose the identity of their holders and tax them transparently and in the same way as ordinary taxpayers. Neither more nor less. By renouncing any ambition in terms of fiscal sovereignty and social justice, we only encourage the separatism of the richest. It is high time to act.

*Thomas Piketty is director of research at the École des Hautes Études en Sciences Sociales and professor at the Paris School of Economics. Author, among other books, of Capital in the XNUMXst century (Intrinsic).

Translation: Aluisio Schumacher to the portal Major Card.

Originally published in the newspaper Le Monde.

 

Note


[I] https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax

 

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