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Updated: May 15, 2023

Ahead of the International Colloquium (May 19th, 2023 - 3:30 pm BST) entitled “Tax Evasion, Corruption, and the Distortion of Justice,” we are releasing a thoughtful overview of the opening article “Beyond Bribery: Exploring the Intimate Interconnections between Corruption and Tax Crimes,” which has been recently published in the Duke University Law School’s Journal of Law and Contemporary Problems and will be the topic of conversation.

Join on Zoom what promises to be a fascinating discussion using the following link (free registration):

The event is aimed at disseminating the publications included in the Special Issue “Tax Evasion, Corruption and the Distortion of Justice,” which has been recently published in the Duke University Law School’s Journal of Law and Contemporary Problems, and discussing them with top-level experts and relevant stakeholders to establish a fruitful knowledge-exchange process.

“Beyond Bribery” is the opening article co-authored by Diane M. Ring, who serves as a Professor of Law and the Dr. Thomas F. Carney Distinguished Scholar at Boston College Law, and Costantino Grasso, who serves as an Associate Professor at Manchester Law School.

The authors of "Beyond Bribery" investigate the various interconnections between corruption and tax abuses, documenting questionable practices that go beyond obvious cases of bribery and tax evasion. By analyzing the negative impact on society of phenomena such as tax sweetheart deals, unethical lobbying, conflicts of interest, and revolving doors, they offer insightful reflections on the limits of the legal definitions of criminalized corrupt practices and tax crimes. This analysis highlights the urgent need to expand the current legal approach to counter inertia in the prevention and fight against such abusive and harmful practices and to develop innovative and effective methods aimed at tackling them.

The article can be conceptually divided into three main sections.

The first section explores power dynamics and criminal behavior that support a reconsideration of current legal approaches to corrupt practices and tax abuses. The points addressed in this section can be succinctly summarized as follows:

• The article explores the interconnections between power and corruption by pointing out that more powerful members of society are more likely to engage in corrupt activities due to their access to resources, societal structures that justify their actions, and expensive legal representation that can shield them from liability. The interdependence between top professionals and the elite, when intensified by the revolving door phenomenon, can lead to precarious situations of capture. This illustrates the close association between power and corruption, wherein individuals in positions of power can sustain corruption by leveraging their access to resources and legal safeguards.

• The authors highlight how the current legal definitions of corruption can be insufficient to capture the most severe cases of corrupt activities, which may include hard-to-identify practices like asymmetric exchanges of favors or even institutionalized unethical lobbying. Inspired by the idea of contributing to efforts to resolve this impasse, this article endorses a vision of corruption encompassing multifaceted and multidimensional practices ranging from petty bribes to the undue influence that large multinational corporations may exert on the political decision-making process.

• The article acknowledges the parallels between corruption and tax crimes, emphasizing their shared fundamental characteristics as both crimes are committed by powerful actors and forms of economic crime. Furthermore, it demonstrates the close functional interconnections between these criminal behaviors. Building on these findings, the author discusses the concept of "tax abuse" and its scope, which includes not only tax evasion and other forms of tax crimes but also the unethical use of legal loopholes to minimize tax liability. Similar to corruption, the current criminal law definitions of tax crime are too narrow to capture the various ways in which the tax system can be abused. Therefore, the term "tax abuse" appears as a more appropriate and comprehensive term to use in that such a broader definition can help to address the issue of exploitative tax avoidance schemes and ensure greater compliance with the spirit of the law.

The second section highlights the interconnections between corrupt practices and tax abuse on a global level, with a focus on the questionable practice of international sweetheart tax deals. The key points of this section are:

• The authors illustrate how sweetheart tax deals prioritize the financial interests of powerful corporations and reinforce the economic inequality generated by their aggressive tax planning. These deals rely on secrecy to remain hidden from the public, benefitting only select corporations and frustrating transparency efforts. Such deals can harm democratic societies and cause inequality by distorting fairness and justice, and may disrupt transnational markets and the economy.

• To support their proposition, the authors critically analyze the Apple-Ireland tax case and its implications on the international level. Many US corporations, including Apple, selected Ireland as their primary subsidiary location due to its low corporate income tax rate and other advantages. However, Apple's tax arrangements went beyond standard practice and were considered illegal by the European Commission. This case emphasizes the interplay between tax abuse, potential corrupt practices, and their consequences on the supranational level. Moreover, the article sheds light on the reactions and challenges that emerged after the European Commission's decision, with Apple and Ireland opposing it for different reasons, and the final ruling of the European Court of Justice that invalidated the sanction. Ultimately, the case exemplifies the ongoing struggle to regulate tax avoidance and prevent corporations from profiting from illicit tax arrangements.

• "Sweetheart tax deals" or special tax arrangements benefit the most powerful corporations and aggravate existing inequalities, causing harm to poorer segments of society and eroding political stability and government legitimacy. Moreover, such deals lead to substantial tax revenue losses, presenting a supranational challenge for states. Owing to their association with power, inherent secrecy, and implication in terms of fairness and equality, these tax arrangements bear troubling similarities to corrupt practices. It is not unexpected that challenging these deals within the jurisdiction where they were established is extremely complicated, and external pressure is necessary to promote transparency and accountability. The absence of such measures underlines the urgent need for effective intervention at the international level.

The third section discusses how corporate power, the tax advising industry, revolving door practices, and unethical conducts contribute to state capture, tax abuses, and institutional corruption. In summary, this part focuses on the following points:

• The article explores how corporate power can influence the political decision-making process, leading to a situation of state capture, which refers to a condition in which private players unduly benefit from the government's policy agenda and decisions. Corporate actors may use various unethical practices, including lobbying, to shape the regulatory framework and reduce their tax burden. Such practices can limit the criminalization of tax abuses and offer powerful players an exit path from the sanctioning processes. The evolution of state power has been shaped by corporate aggressive lobbying, resulting in a dangerous mix of power and unaccountability. The article emphasizes the need to address the undue influence that corporate power can have on the political decision-making process, particularly in the context of taxation.

• The authors then discuss the correlation between the tax advising industry, economic crime, and corporate influence. According to the research on which the paper is based, corporate influence is linked to the widespread and lucrative nature of the tax advising industry, which includes major accounting and law firms, financial institutions, and auditors. These actors may either acquiesce to or actively participate in abusive practices in the area of taxation. Such actors are also involved in developing the legal framework for taxation and the regulatory environment for corporate accounting and auditing, potentially creating conflicts of interest. The article underscores the necessity for anti-tax abuse strategies that take into account the pervasive and opaque ways in which these firms may impact the regulatory landscape.

• The intricate nature of tax systems places tax professionals, and in particular the largest accounting and law firms, in a dominant position that can be used to unduly influence the political decision-making process. Professionals may assist powerful criminal actors in injecting illicit gains into the international financial system. Lawyers and accountants may facilitate tax abuses through the creation of a complex financial network of transactions that conceals the source and ownership of the transferred funds. This problem is even more serious within jurisdictions that are marked by a high degree of financial secrecy, which creates a significant obstacle in the battle against such malfeasances.

• The "revolving door" phenomenon, wherein public officials transition to the private sector and vice versa, poses potential risks of corrupt practices. Officials may modify their approach towards organizations they have connections with, to enhance future job prospects. Those who leave the public sector for the private one may disclose non-public information and provide access to key officials, while private sector employees in senior government positions may pursue policies that benefit their former employer. Despite the problematic aspects of such a phenomenon, there is insufficient evidence regarding the impact of these career transitions on public policy and enforcement efforts. Furthermore, there is widespread reluctance to discuss these practices and their negative effects, possibly due to the inherent conflicts of interest that exist principally in highly specialized sectors such as taxation.

• Finally, the article highlights how the combination of the misuse of corporate power, revolving door practices, and unethical conducts of professional enablers contribute to corrupt practices and tax abuse, increasing the risk of institutional capture. Over the past decade, a plethora of scandals have illustrated the extent of corporate involvement in tax abuses and the role of tax professionals. The expanding grey areas of tax abuse deftly navigated by unscrupulous tax advisers permit powerful individuals and entities to exploit legal loopholes and unduly avoid tax liabilities. The undue pressure on tax administrations could also be leveraged to shield firms aligned with the ruling elite from scrutiny or to target competitors.


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