Welfare, tax control and legitimacy
It is evident that the most important basis for the welfare state in the form of taxes is largely reliant on effective instruments of control. In the EU, the financial crisis and problems with state budgets in a number of Member States have emphasized the importance of effective and adequate control and collection provisions being established and enforced in the Member States. It is important for cooperation between Member States that each Member State meets its EU budget targets because poor economy in a Member State, in particular in Eurozone countries, has negative consequences for the entire EU. Tax control is a very important means of ensuring that the states’ income in the form of direct and indirect tax is maintained in accordance with the tax legislation in the relevant Member State. For example, in Greece the state has been unable to collect taxes effectively because the tax inspection system in Greece is inefficient and lacks legitimacy in the eyes of the population. In Denmark, the new government has changed a compliance based tax inspection model to a model based on greater, more intensive tax control provisions to ensure efficient tax collection. The Ministry of Taxation now describes itself as a ‘Ministry of War’ in the battle to safeguard the state’s income and reduce the so-called tax gap. (The tax gap is calculated by comparing the national figures with the taxation statistics for personal income). In addition, the Danish government has decided to publish lists of corporation tax payments to draw attention to companies’ financial contribution to society, but also presumably to draw attention to multinational companies that do not contribute (sufficiently) to the Danish state by paying corporation tax. Denmark is far from being the only state to focus on multinational companies’ low or non-existent corporation tax: The EU and OECD are also working in this area. A welfare society is dependent on the endorsement of the welfare model by its citizens. If the general attitude, for example, is that too many tax payers avoid contributing to tax or duties, the legitimacy of the welfare model is weakened in the population. The effect of a loss of legitimacy is, by all accounts, a reduction of the perceived duty to pay tax which in turn further weakens the solidarity of the welfare model. A core discipline in increased tax control is the legal balance between the solidarity and efficiency of the tax system, and the protection of the individual tax payer’s legal rights.
Tax control provisions as a research field are concerned with, in addition to the taxation process, administrative law, constitutional law, human rights, EU law and a number of disciplines outside jurisprudence, such as economics, political science, history and psychology. The research theme also has other connections: to social law, where control has a corresponding importance in the allocation of social rights and to labour law, where legal regulation and control of work is extensive.
As a starting point, the research theme is broad and can result in a large number of research projects. The two initial projects are presented below.
Project 1: The legitimacy of tax control – identifying best practice
This purpose of this project is to analyse the legitimacy of control measures concerning direct and indirect taxes based on a comparative analysis of relevant EU Member States. The project’s purpose is also tentatively to outline a best practice in Denmark and put the Danish model into an EU perspective. The intention is to ask whether or not a general control model can be used in, and regulated by, the EU thus helping to create legitimacy in both the Member States and the EU. The EU is not inexperienced in control provisions at an international level, in that the extensive agricultural subsidies are covered by strict control provisions. The project aims to include an analysis of the EU framework for control provisions that can be used in all Member States. If possible, the research project will also take into account the importance of the legal culture surrounding tax control provisions in the respective Member State.
This project has researchers from the tax and duty law group (Jacob Graff Nielsen and Karina Kim Egholm Elgaard), the social law group (Kirsten Ketscher and Marta Caneiro), the labour law group (Jens Kristiansen and Jacob Falsner) and EU law (Catherine Jaqueson).
Project 2: The EU and human rights framework for tax control
A natural consequence of the increased political pressure for intensified tax control is a weighing up of its legal scope. This requires an in-depth analysis of, amongst other things, the regulative scope for tax control in constitutional, administrative, EU and human rights legislation. For example, an analysis of the sanctity of the home pursuant to the Act of Constitution, Section 72 and the European Convention on Human Rights, Article 8 on the right to respect for family and private life in relation to tax inspections. The EU legal framework for tax control includes, amongst others, the assistance directive (Council Directive 2011/16/EU) and the collection directive (Council Directive 2010/24/EU), but also the directive on a ensuring a real minimum taxation of income from interest (Council Directive 2003/48/EC) that has the nature of a tax control directive. In the EU there is thus an increase in focus on coordinating particularly effective exchange of information between the tax authorities of Member States.
There is a need for academic analyses of these national and international frameworks for tax control that is overshadowed by the eagerness to ensure precious tax and duty revenue in times of crisis.
This project has researchers from the tax and duty group (Jacob Graff Nielsen and Karina Kim Egholm Elgaard), together with other researchers from WELMA, including those working with human rights. Researchers from other research centres at the faculty that work with human rights will be invited to collaborate, e.g. CECS and CILJ.