Thursday, May 28, 2020
Stephen Daly (King’s College London) presents Trust, Tax Administration and State Aid today as part of the Indiana/Leeds Summer Zoom Tax Workshop Series hosted by Leandra Lederman (Indiana) and Leopoldo Parada (Leeds):
The European Commission’s rulings investigations are predicated on a lack of trust in the tax authorities of certain Member States. The solution to this problem lies not in second-guessing the work of tax authorities, but in ensuring that each is subject to intelligent accountability.
Trust is both inevitable and desirable in life. That we must somehow put trust in those who collect taxes is no different. But in order to know who and whether and how much to trust, we must establish the trustworthiness of those who are empowered. O’Neill suggests that a system of intelligent accountability — informed and independent judgement communicated intelligibly — provides a framework for assessing trustworthiness. It is posited in this article that the Commission’s investigations into tax ruling practices are founded on a lack of trust in the relevant tax authorities. To alleviate (or perhaps justify) these concerns, intelligent accountability is required. What must be established first is whether there are forms of accountability which are sufficiently intelligent in EU Member States, and if not, what steps should be taken in order to establish such accountability. Different Member States have different institutional arrangements for the collection of taxes and to this end, it would be wrong to assume that there is a one-size-all solution to accountability which can be imposed. This article has assessed three different means by which accountability can take place: bottom-up, top-down and internal.
Bottom-up accountability through simple transparency initiatives is insufficient by virtue of the fact that the information published will not necessarily be intelligible, nor readily accessible. Transparency alone does not provide accountability. Top-down accountability, through selective investigations and litigation can also assist, though by virtue of limitations on resources, these can in reality only play a minor role. The most profitable means of holding tax authorities to account are the internal mechanisms within Member States, in relation to which the Commission should conduct a comprehensive investigation and devise guidelines for best practice. If Member States follow these guidelines, then they can be protected generally from the omnipotent eye of State aid enforcement.