“I think what’s going happen [in the United States] is a few rounds of raising taxes on the wealthy,” says Kenneth Rogoff, an economics professor at Harvard University. “But that’s not going to begin to solve the budget problem.”
In Britain, the focus has been on another side of the tax equation: corporate responsibility.
Companies that avoid paying tax, even through legal methods, have been branded “immoral” and shunned in a series of boycotts, demonstrations and sit-ins. For example, a group of activists recently took over a Starbucks in central London, chanting and singing and turning the coffee shop into a temporary daycare site for families taking part. Their point was clear: wealthy businesses, like wealthy individuals, should be expected to do their part.
The tone was set last fall by a parliamentary committee that sharply criticized multinational companies – including Starbucks as well as Amazon and Google – for avoiding taxes by shifting profits offshore to lower tax jurisdictions. The committee also found that the government failed to collect around $50-billion annually in taxes because of avoidance schemes.
The public outcry became so intense, Starbucks announced last month that it would pay roughly $32-million in additional tax over the next two years even though the company has followed the letter of the tax code until now.
There are those who say the tax issue runs much deeper, however, than simply putting pressure on top earners – and that now is the time to consider more radical changes.
Canadian economist Don Drummond, who recently advised the Ontario government on reducing its budget deficit, says recent economic challenges may be a spur to changing broader cultural views about taxation. And that we could look to northern Europe for ideas on future tax reform.
Those countries, he says, have high personal tax rates and taxes are harder to avoid. But they also have strong incomes, a more equal society with less poverty, and consistently score high on citizen satisfaction levels.
“If you stand back in the abstract and shop around the world for what kind of economic or taxation model you might want to emulate, you really have to pause and take note of what’s happening in northern Europe. We tend to brand all European economies as basket cases, but the northern European ones have held up fairly well,” he says.
Whether Canada would accept a northern European model is unclear. Despite ideals of social welfare, lower taxes have been a mantra for nearly all politicians here and the focus so far has been on spending cuts.
Finn Poschmann, vice-president of research at the C.D. Howe Institute, a conservative think tank, argues the limited tax increases imposed so far by the provinces are driven by need not a shift in attitudes about taxation.
He also believes increased taxes on the wealthy, while politically popular, will prove economically ineffective because high income earners will seek expert help to lower their tax load. As in France, higher taxes on top earners could also backfire, driving those earners to other provinces or countries where the tax base is lower.
“The political response of ‘tax the rich’ which we’ve seen now in Ontario and Quebec and in the United States and France is very much a matter of politics and desperation, rather than something that produces good economic outcomes for pretty much anyone,” he says.
Other thinkers disagree with Mr. Poschmann.
Kalle Lasn, for instance, the Vancouver-based founder of anti-consumerism magazine Adbusters and an early proponent of the Occupy movement, says tax reforms in various countries are part of a larger disillusionment with traditional economics.
He argues, in fact, that reform needs to go farther than just taxing the wealthy; there should be new taxes on the “bads” in society – whether hollow, computer-driven currency trades or gas-guzzling vehicles – and new ways to cut costs for the “goods.”
For him, any tax avoidance – by corporations or individuals like Mr. Depardieu – is clearly immoral.
“To set an example where he’s leaving the country where he was born to avoid taxes, that’s something that’s ethically and morally unforgivable,” Mr. Lasn says. “What kind of example does that set?”