EXPERTS ARE OFTEN CORRUPT : New Research Exposes the Limits of Accountability and Enforcement in Corporate and Personal Taxation

As an expert advisor to the European Union funded project on Tax Corruption – VIRTEU – I was asked to research and advise on the challenges of tackling tax evasion and corruption. For the research I had to dig deep into my experience as an auditor, as an accounting researcher, and the decades of analysis on the Big 4 global accounting firms and their methods of operation. This work has culminated in this expert report which is available as a free download.

This report explores the practices of tax avoidance and evasion which often undermine efforts by states to collect fair taxes and provide valuable infrastructure. In particular, it focuses on the role of professional accountants and lawyers in enabling tax corruption by using their skills and knowledge of the rules to help corporate and individual elites exploit any gaps and thereby minimise the payment of taxes. These professional individuals, institutions and networks are increasingly powerful in undermining tax collection. At the same time, offshore tax havens and secrecy jurisdictions make the problem of global enforcement of tax collection very difficult and encourage a race to the bottom in tax collection. Common techniques of tax avoidance are explored and methods used to detect and monitor aggressive tax practices are discussed. Institutional structures and specialisation mean that professionals working in large firms often play a partial role and may not be fully conscious of their actions, but the collective impact of the advice and strategy is to seriously undermine and reduce tax collection by states.

Professor Dan Ostas of the University of Oklahoma has written an equally trenchant ethical critique of the state capture of the tax enforcement process. This report focuses on the symbiosis between government officials and taxpayers that allows a huge and widespread tax gap to persist. It finds moral blame among both government officials and taxpayers. High-income earners and corporate actors often find ways to conceal income through tax shelters and the offshoring of profits. Today, there is an estimated $32 trillion of untaxed money reported in places where no money was earned and then reinvested around the globe. The report explores the symbiosis between government officials and taxpayers that allows this staggering tax gap to persist. It also discusses how the judiciary plays a role in supporting the tax gap and highlights how legislators also share part of the blame for failing to close tax loopholes.

You are welcome to use this research in your teaching and research.