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As the International Colloquium “Tax Evasion, Corruption and the Distortion of Justice” approaches (May 19th, 2023 on Zoom), we are releasing a synopsis of the article “Corruption, Tax Evasion, and the Distortion of Justice: Global Challenges and International Responses” recently published in the Duke University Law School’s Journal of Law and Contemporary Problems.
Join on Zoom what promises to be a fascinating discussion using the following link (free registration): https://mmu-ac-uk.zoom.us/webinar/register/WN_nBM4DatiRAarKkbShqoSeQ
The event is aimed at disseminating the publications included in the Special Issue “Tax Evasion, Corruption and the Distortion of Justice,” which has been edited by Prof. Diane Ring, Dr. Costantino Grasso, and Dr. Lorenzo Pasculli, and has been recently published in the Duke University Law School’s Journal of Law and Contemporary Problems. The articles included in the Special Issue will be discussed with top-level experts and relevant stakeholders to establish a fruitful knowledge-exchange process.
“Global Challenges and International Responses” is authored by Prof. Lorena Bachmaier Winter, Professor at the Complutense University of Madrid, and Dr. Donato Vozza Senior Lecturer in Law at Roehampton Law School. The article will be discussed by Prof. María Amparo Grau Ruiz, Professor of Tax Law at the Complutense University of Madrid.
Exploring the Interplay of Corruption and Tax Evasion and the Quest for International Legal Solutions
The article discusses the interplay of corruption and tax evasion as global crimes, highlighting their devastating impact on the rule of law, the economy, and society. These crimes are not only committed by fraudsters and criminal groups but also by high-net-worth individuals and multinational companies. Despite the significant economic losses incurred due to corrupt behaviors and tax evasion, there is a notable gap in international legal responses to the latter. Indeed, while comprehensive measures are in place to address corruption, the response to tax evasion is more limited, focusing on non-criminal strategies.
Building also on the analysis carried out in the article “Beyond Bribery: Exploring the Intimate Interconnections between Corruption and Tax Crimes” authored by Prof. Diane Ring and Dr. Costantino Grasso, which explores the distortions of justice caused by the interconnections between tax abuses and corrupt practices, this research argues that the absence of binding international responses to tax crime can lead to distortions of justice and hinder international cooperation. By exploring the current limits of the existing legal framework in addressing current issues, the article advocates for bridging this gap by adopting an international convention to prevent and counter tax crime.
Divided into five parts, the article analyzes corruption and tax evasion as global crimes, compares international criminal policy responses to these phenomena, discusses the possibility of introducing a binding international convention against tax evasion, and concludes by encouraging further discussion on promoting global cooperation to counter tax abuses.
Corruption and Tax Evasion as Global Crimes
Both corruption and tax abuses, despite being featured by significant differences, cause global harm. These phenomena impair state revenue, distort the use of public resources, damage democracies and the rule of law, and have negative effects on the economy, international business, and human rights.
While there is a significant development of anti-corruption legislation at the international level, there is a tendency to underestimate the international dimension of tax evasion and the obstacles to international cooperation in tax crime matters between authorities.
The article argues that an integrated approach is necessary to address these global issues effectively and prevent these illicit practices from combining and feeding off each other, thereby reducing the effectiveness of current anti-corruption strategies adopted at the international level.
The Asymmetry of the International Legal Responses to Corruption and Tax Evasion The paper explores the asymmetries in international responses to corruption and tax evasion. It highlights the differences in legal instruments, preventive and punitive measures, and initiatives adopted in the private sector and society to combat these two phenomena. The fight against corruption involves multiple international organizations and the adoption of numerous conventions and peer-review monitoring systems. However, the practical implementation of these measures faces challenges at the domestic level.
Differently, the response to tax evasion lacks coverage by international legal instruments such as the one that has been developed in the area of anticorruption with the adoption of conventions like the United Nations Convention Against Corruption (UNCAC) and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Efforts to counter tax abuses focus on double tax treaties, base erosion, profit shifting, and the exchange of information between tax administrations.
Despite these efforts and the presence of the OECD Ten Global Principles for Fighting Tax Crime (TGPs), which serve as a guide to promote the fight against these criminal offenses, there are no specific international hard law instruments aimed at fighting against tax crimes with the result that the applicable measures have mainly a general or derivative nature, as they can be traced back to regulatory tools prepared in different areas of law.
A noteworthy exception is represented by the legal framework developed at the EU level consisting inter alia of the implementation of criminal law measures to counter transnational value-added tax fraud and customs fraud and the establishment of the European Public Prosecutor’s Office (EPPO). However, these measures face challenges such as limited scope, the need for greater coordination, and differences in the legal systems among member states.
The article also discusses the involvement of the private sector in the fight against corruption and tax evasion. While corporate criminal liability has been established in many countries to hold corporations accountable for corruption, similar enforcement of corporate liability for tax abuses is lacking globally. Corporate tax compliance programs, ethical conduct, and collective actions to counter tax evasion are also not widely embraced by corporations.
Despite these asymmetries, NGOs and investigative journalists have played a crucial role in uncovering malpractice in taxation and corruption, raising public awareness about these issues. Tax Justice Network and Transparency International are among the most relevant examples of organizations that have made significant contributions in combating corruption and tax evasion, respectively.
The article concludes that initiatives to fight corruption have received more attention and progress internationally compared to efforts to combat tax evasion. Recent data leaks have brought transnational attention to tax evasion and avoidance, leading to some countries adopting new policies to strengthen tax enforcement. However, the fight against tax evasion is considered to be significantly behind the progress made in countering corruption. Efforts to use criminal law to curb tax evasion at the international level remain under-explored compared to the extensive literature on the prevention and punishment of corruption.
The proposal for an International Convention Against Tax Evasion (CATE)
In light of the arguments presented above, the article proposes the introduction of an international Convention Against Tax Evasion (CATE) to address the fragmented and ineffective response to tax crimes worldwide. Tax evasion is a global problem that requires a discussion on a common, binding, international solution. Inadequate national legal frameworks, limited resources, and a lack of cooperation between countries hinder the detection, investigation, and prosecution of tax abuses. The proposed CATE might aim to criminalize serious tax evasion conduct, strengthen preventive measures, improve investigation and prosecution efficiency, and promote international cooperation. However, harmonizing criminal law responses and reaching a consensus on the convention’s legal provisions would be challenging due to different legal traditions and geopolitical conflicts.
The lack of political will is identified as the main obstacle to adopting an international convention. The article suggests that raising awareness of the harmful effects of tax crimes and the importance of countering them globally through debates among society, policymakers, and industry within international forums could help overcome this obstacle. The development of an international convention would require consensus-building around general principles and leveraging the work of organizations like the UN and OECD. However, the process is expected to be lengthy given the current international tax competition and political environment.
Despite the challenges, the seriousness of the issue justifies the need to discuss the adoption of a common international legal framework to combat tax crimes. Moreover, the recent proposal for a UN Tax Convention also provides an opportunity to consider an international legal framework for countering tax offenses at the global level. The article concludes that while immediate success may not be guaranteed, studying and developing such a framework remains crucial.
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