Delivering the 23rd annual David R. Tillinghast Lecture on International Taxation, Edward Troup, former executive chair of Her Majesty’s Revenue & Customs (HMRC) in the United Kingdom, warned that globalization, disruptive business models, and a rising disdain for the rule of law have the potential to undermine tax systems around the world.
In his September 26 address, “Globalism, Individualism, and Technology: Apocalyptic Times for Tax Systems,” Troup emphasized that for tax systems to be effective, taxpayers must have confidence that taxes are being levied fairly.
“A lot of what's going on in the world is testing that confidence,” he said.
Collecting corporate income taxes presents a particular challenge for tax administrations, Troup said, citing the ability of multinational corporations to shift profits across borders and the rise of new, tech-driven business models. Although in most countries, corporate tax revenues are relatively small compared to tax revenues from individuals, he said, “failure to tax corporate income effectively risks undermining confidence in the system of personal tax and the willingness of individuals to pay tax themselves.”
The real measure of the effectiveness of a tax administration is how much tax goes uncollected, Troup said. In the UK, he said, that failure rate is 5.7 percent. In the United States, he noted, the Internal Revenue Service estimates that the US government is able to collect only some $2 trillion of the approximately $2.5 trillion owed by taxpayers yearly.
“Would you buy shares in any organization which was only capable of collecting 80 percent of its debts?” Troup asked. “You certainly have some questions to ask of the management.”
Watch a video of the entire lecture (1 hour 8 minutes):
Posted October 16, 2018