Over the last decade there has endless stories about how individuals and companies have slashed their tax bills through clever accounting practices. This is often because one part of the tax system undermines another part, an effect that economists refer to as “spillovers”. For example, if a tax haven has no corporation tax this can encourage businesses to artificially shift their profits to that country and away from a country with a higher tax rate.
Spillovers can happen between two countries, but can also happen within a domestic tax system. A case in point is that in the UK the income tax system is undermined because some people are able to turn their income into capital gains, which are taxed at a lower rate.
In order to ensure that companies and individuals are properly taxed it is vital to understand the impact of these spillovers in a structured way. That is why Tax Justice UK has joined up with Oxfam, ActionAid, Eurodad and Tax Justice Network to call for countries to carry out regular spillover assessments. Read the full declaration here.
This builds on the work carried out by ActionAid and by Richard Murphy and Andrew Baker on how to do these types of assessments.