Editorial. Tax evasion: an indication of a new economic and political model?

1 Tax evasion has been in the spotlight recently with news of the “Panama papers”. Does the spectacular nature given to the information – which made headlines in a number of respectable publications for nearly a week – shield a much more important phenomenon? Is this really the right direction for us to be looking if we want to understand what tax avoidance looks like today and what this reveals? After all, there was nothing original about the system used by the taxpayers that appear on the list held by the media.

2 Yet in reality the affair is more serious than it appears and its consequences especially in terms of tax injustice or unfair competition, whether legal or not, now more than ever raise the underlying question over the function and legitimacy of taxation.

3 In today’s globalised and interconnected world, tax avoidance, more than a simple product of resistance, is the sign of a deep-rooted shift in the economic and political model that has been in place since the “Trente Glorieuses” (1945-1975). With globalisation, and more specifically the digital society, a growing number of economic players live in very different environments than the environments limited to the national or local territory, the home of most SMEs as well as that of national political and administrative players in charge of fiscal policies. With each side living according to different cultures, different times, different spaces and different standards.

4 This new context means that the tax base is now threatened by unprecedented erosion relating both to the development of a globalised economy and its integration into the digital economy. A combination that runs the risk of the shift towards a new civilisation in which the role of taxation is unclear. Therein lies the crux of the matter. The tax base is undergoing a nearly invisible process of deterritorialization that fundamentally calls into question traditional fiscal, legal and administrative frameworks, posing a direct threat and revealing the weakness and fragility. With this process we are facing an entirely new form of international tax evasion that often embraces the more traditional systems of tax avoidance all the while multiplying the effects. This is on top of the national underground economy which has been amplified under the sharing economy through digital platforms which occasionally host clandestine trade.

5 Overall taxation is being attacked and eroded from both the outside and within and its survival could also be under threat.

6 The challenge is therefore great. Is it necessary, under these conditions, to continue working towards improving legal and administrative instruments that have been overtaken by changes in their environment? Is it not our conception of taxation that needs to be changed? Is it not necessary to assess the validity of taxes taken as a system as a whole? The majority of compulsory levies were invented for a centralised and relatively closed State and for an economic model that mirrored it. The legitimacy and relevance of this system should already be under review in an open, multipolar and increasingly competitive world struggling with the shift towards the digital economy and robotisation.

7 Beyond the need for rules to stem the tide of tax fraud, like those proposed by the OECD or the European Union, the legitimacy of which is not debatable, it appears crucial to also examine the future of taxation outside of the frameworks for thought specifically tailored to the 20th century. It is the future of taxation that should therefore be of concern.

8 In this regard it is important to remember that the amplification of international tax evasion is above all the outcome of a reorganization of the economy on a global scale and in particular of the way in which business works. This has to do with the development a redistribution of duties between entities of the same group which are spread across the world under a horizontal structure, with no real centrality as was the case only a few years ago. Making full use of the possibilities offered by digital technology, this restructuring is the outcome of a world that is changing models which has led to a different outlook on tax evasion. Tax evasion is seen as the expression and the outcome of a form of society beyond the boundaries of States, that has organised itself without being noticed. In this context, while tax evasion is still an objective for some businesses, it is also and especially the logical consequence of an increasingly competitive and open world that is building itself with no external guidance. This should spark debate over the relevance of our tax systems faced with the new balance between territories that is currently taking shape.

9 It is now a well established fact. For the past forty years we have been undergoing a huge transition, a shift of our society towards another world. Calling into question our ways of thinking. Calling into question our institutions. Calling into question our tax systems that were designed for a now bygone era. We are confronted with a “silent revolution” and faced with a transition to a different type of world.

10 We are caught between two models of society. We are living through the transition from an economic and political world that is organized vertically to a world that is spread across horizontal networks. This relates not only to business networks but also to territorial networks, with metropolises whose economic and political power continues to grow driven by ever-increasing urbanisation. Interconnected networks of businesses now have a group of international metropolises as anchors. That is where the new economic and political model is being built and that is where the future of taxation must be invented. We are facing the creation of a new civilisation and we must keep this in mind. Therein lies the major question.