CAPITAL MOBILITY, FINANCIAL CRISIS, AND TAX COMPETITION Dr João Dácio Rolim (LLM-LSE, PhD QMUL, Tax Lecturer FGV) IBDT Faculty of Law USP 22/08/2011

Tax and Competitiveness I -The Global Competitiveness Report 2011(world economic forum) I -The Global Competitiveness Report 2011(world economic forum) *Brazil 58th, but effect of taxation (139, last rank) and total tax rate (127). *Brazil 58th, but effect of taxation (139, last rank) and total tax rate (127). II -Paying taxes report 2011 (pwc/world bank/IFC) II -Paying taxes report 2011 (pwc/world bank/IFC) *Brazil: ease of paying (152), time t comply (183, last) and total tax rate (168, 68%).

Correlation country size and tax rates - OECD Correlation country size and tax rates - OECD

Tax Competition I - OECD (1998/Jan Report) I - OECD (1998/Jan Report) *Equitable allocation of tax revenues *Fair allocation of tax base *Harmful tax practices The Global Forum on Transparency and Exchange of Information for Tax Purposes - G20 London meeting 02/04/2009 (transparency and exchange of information)

Tax competition II – United Nations II – United Nations *Global taxes and international tax organization x fiscal sovereignty and tax competition (Zedillo Report/2001) *Declaration on Financing for Development (Doha, 2008, Dec): modern tax systems, more efficient tax collection, tax base and effectively combat tax evasion.

Tax Competition III WTO III WTO *Trade neutral allocation of tax revenues *Non-protectionism/non-discrimination *no subsidies to exports (abuse of rights, good faith, neutrality, tax avoidance)

Tax competition IV European Union IV European Union *Code of Conduct (1997/Dec) *State Aid restrictions (EU Treaty) *Good Governance in Tax (Ecofin, 14/05/2008), principles of transparency, exchange of information and fair tax competition *Balanced allocation of taxing powers *Fundamental freedoms (single market) x fiscal sovereignty (direct taxation)

Tax competition V - ECHR V - ECHR *Fiscal sovereignty of States x fundamental rights *Right to freedom of movement (tax residence): reasonable restrictions allowed in the public interest * Right to non-discrimination (non nationals)

Sample General tax rates VAT standard rate OECD CEEC-10NA a NA2021 Top individual income tax rate OECD CEEC-10NA 2923 Corporate tax rate OECD CEEC-10NA Statutory tax rates, 1985 – 2009

Tax measures taken by EU-27 Member States TAXES LOWER TAXES HIGHER Personal Income Tax: OE, DK, FI, FR, DE, HU, LV, EL, IE, UK LT, LU, MT, NL, PL, PT, SI, SK, SE CIT rate: EL, LU, PT, SE IT, LT (allowances):FR,LT, PL, PT, SI, SK OE, BG, ES, IT, NL, DE, VAT Standard Rate UK HU, IE, LV, LT Reduced Rates BE, CY, CZ, FI, FR, MT, RO HU, EE, IE, LV, LT Source: adapted from European Commission (2009c).

Tax systems, financial crunch and tax competition Worldwide basis to territoriality? Worldwide basis to territoriality? Capital Export Neutrality (credit) Capital Export Neutrality (credit) Capital Import Neutrality (exemption) Capital Import Neutrality (exemption) More protectionism? WTO G-20 More protectionism? WTO G-20

Tax systems, financial crunch and tax competition Source v Residence (benefit x ability to pay) fairer allocation of tax jurisdiction Source v Residence (benefit x ability to pay) fairer allocation of tax jurisdiction Fiscal incentives (FDI and domestic incentives) Fiscal incentives (FDI and domestic incentives) more transparency (exchange of information and enforcement) more transparency (exchange of information and enforcement) Social redistribution (global tax?) Social redistribution (global tax?)

THE END OF THE FINANCIAL THE END OF THE FINANCIAL CRISIS AND TAX COMPETITION?