The case for abolishing the tax privileges of international organisations
The problems can be crudely summarised as surrendering tax sovereignty to an international body, reducing pressure for Government efficiency by limiting tax competition, complexity, cheating, distortionary exemptions and the certainty that those countries that play by the rules will be the ones whose competitiveness is damaged most. For our political masters, however, this can be boiled down to a simpler argument, ‘cripes debt’ and ‘oooh shiny’. Which politician does not like a tax proposal they believe someone else will painlessly pay, rather than having to deal with the hard graft of constraining the waste arising from their own bottomless promises. As pandemic payback becomes pressing, the OECD find themselves kicking on an open door to Governments living beyond their means.
This short piece however focuses on those calling for this change. There is something profoundly distasteful about the apparatchiks of multinational quangos, who exempt themselves from paying the taxes that apply to the rest of us, proposing we pay more taxes.
How very dare they.
This is the stuff of Brexit votes. This is out-of-touch global elites demonstrating why they are out-of-touch. Corporation taxes are not taxes on companies, they are taxes on workers who get lower wages. They are taxes on shareholders, which generally means pensioners via their pension funds and investors via their reduced dividends. There is no corporate magic money tree, just higher taxes, passed on to the general population through higher prices, lower income, and lower returns.
Not that you would know that if you work for the OECD, the United Nations, or our acronym namesakes the International Energy Agency, amongst others. As the OECD say in their accounts:
“The Organisation enjoys privileges and immunities, notably that of being exempt from most forms of taxation.”
Meanwhile their lavishly paid staff, when not swanning around Paris patronising the cafes and art galleries, enjoy benefits including 18-24% employer pension contributions, 30 days annual leave, French public holidays, one week extra at year end, private medical insurance for the whole family, various forms of paid leave, allowances for their families and children’s education, expat allowances, moving allowances, and child care support. They pay no income tax, and only modest contributions to their own benefits programmes. It is a similar story at the UN.
Amazing work if you can get it. It does though remove you from any sense of the real world or the pressures experienced by ordinary people from an ever-expanding global tax burden. It prevents countries competing to host these international bodies and the associated spending power of their personnel, who would surely not choose to reside in France if they had to pay France’s astronomical personal taxes. These amount to a net tax burden of 46% versus, for example, Irish rates of 22% or the UK’s 35%. These considerations are highly relevant to, for example, corporations deciding upon where to invest.
This is simply not good enough. If the OECD wish to be taken seriously by the public on these proposals, then their staff must pay the taxes the public pay. At a bare minimum, they should pay the same taxes as their host country, or perhaps the aggregated average of their members, with either option paid to the host itself. If there are concerns this overly advantages the host, then perhaps they need to come up with a method of redistributing those taxes based on where the OECD’s activity is taking place. And these taxes should come out of the OECD’s current spending, not contribution increases. The OECD staff need to feel what the impact of paying taxes means, not pass on the costs to other taxpayers. If that means a quarter to a third of them get fired, so be it, what does that matter compared to ensuring a fair minimum contribution to the work of national Governments?
And let us not stop there. We are forever hearing from these bodies about their commitment to and the importance of tackling climate change. This generally involves a lot of flying around the world and travelling from airports in limousines and taxis to speak at air-conditioned conferences. It is surely time all this activity was taxed and taxed hard. There needs to be a minimum and self-imposed carbon tax on all activity by international agencies, to incentivise better choices, such as staying in hotels without air conditioning. There should be no travel expenses for any form of polluting transport, and any housing allowances must clearly be aligned with minimum standards of energy efficiency; perhaps they could share rooms in public housing? Allowances for children must go, larger families have a higher carbon footprint. Perhaps I go too far, maybe this should only apply to the other IEA and UNFCCC.
Then there is shopping. VAT rates vary between countries and sometimes they have sales taxes. At the very least international bureaucrats should be denied the right to enjoy duty free, and should volunteer to apply the EU’s preference for minimum VAT rates to their own purchases. Anybody engaged in setting standards for controlled substances should pay extra on their own purchases of tobacco and alcohol. If they invest in shares, they may wish to volunteer to pay a transactions tax alongside any stamp duties or capital gains taxes that are deemed a fair legal minimum. Their pension funds could be required to invest only in schemes that accord with their own standards. If there’s a shortfall, tough, what price upholding your own principles?
Will this happen? Of course not. But if it does not, these organisations’ views on the topic of tax should be discounted accordingly.