Taxing Crime – A Whole-of-Government Approach to Fighting Corruption, Money Laundering and Tax Crimes

Wednesday, January 18, 2023 at 11:00-12:30 Vienna time (CET)

Jeffrey Owens, Director of the WU Global Tax Policy Center at the Institute of Austrian and International Tax Law, Vienna University of Economics and Business (WU)
Siddhesh Rao, PhD candidate and research associate, WU Global Tax Policy Center at the Institute of Austrian and International Tax Law, Vienna University of Economics and Business (WU)
Yara Esquivel, Senior Financial Sector Specialist, World Bank

Sebastian A. Roy, Chief Analyst, Macroeconomic Policy Department, Ministry of Finance of the Republic of Poland

Markus Eller, Senior Economist, Joint Vienna Institute

This webinar was organized jointly by the WU Global Tax Policy Center at the Institute for Austrian and International Tax Law, Vienna University of Economics and Business (WU) and the JVI. It featured the presentation of the book “Taxing Crime: The Whole-of-Government Approach to Fighting Corruption, Money Laundering and Tax Crimes”, published by the Stolen Asset Recovery (StAR) Initiative of the World Bank and the United Nations Office of Drugs and Crime (UNODC) in late 2022. The book is the result of a joint World Bank, UNODC and WU project on improving public sector governance in Africa to counter several forms of illicit financial flows. It draws on the expertise of a large number of practitioners, including tax auditors and investigators, law enforcement, financial investigators, investigating magistrates and prosecutors from developed and developing jurisdictions and from civil and common law systems. Three of the co-authors – Jeffrey Owens, Siddhesh Rao and Yara Esquivel – presented key takeaways from the book to the webinar audience. In addition, Sebastian A. Roy provided a complementary discussion and emphasized the relevance of the book for countries in the JVI region.

Illicit financial flows derived from tax evasion, corruption and money laundering often make the headlines. Although their magnitude is a matter of debate, there is little doubt that they can be significant and have important implications for the economy. Tax evasion and corruption drain limited public resources and often hurt the most vulnerable populations by reducing resources available for much-needed services. Beyond the budget, tax evasion and corruption harm the social fabric by fueling inequality and eroding trust in public institutions and the rule of law. Therefore, adequate measures to reduce tax evasion and strengthen public sector governance seem very important for a more inclusive economic development and should thus also strengthen a country’s resilience to the various shocks in rapid succession.

It is a key message of the book that a whole-of-government approach, involving a better cooperation and information sharing between tax authorities and law enforcement agencies, can lead to considerable progress in the fight against tax evasion, corruption, and money laundering. For example, the authors refer to several cases of corruption and money laundering that were initially uncovered through regular tax audits. However, there are still important obstacles that prevent effective interagency collaboration and information sharing, including legal, operational, cultural, and political barriers. The book addresses each of these barriers and offers suggestions for overcoming them, including practical recommendations, case studies, and memoranda of understanding (MOUs) that agencies can use.

In the case of Poland, Sebastian A. Roy outlined in his discussion the successful example of the merger of agencies previously responsible for tax administration, customs service, and fiscal control service under the umbrella of the National Revenue Administration created in 2017. There is evidence that the related data pooling between tax administration and fiscal controlling units proved successful in identifying fraudulent events. This reform was part of a broader package that also introduced the possibility of more systematic cross-checking of VAT receipts with banking flow data and usage of financial and banking data for law enforcement. Altogether this reform helped to enhance the efficiency of the fight against economic crime, as for instance attested by the significant decline in VAT gaps.

The concluding discussion centered on data protection and trust issues. Some participants in the audience shared the observation that current data protection laws still prevent banks from adequately sharing information with tax authorities. On the other hand, there was also the concern that more intensified information sharing, not only between banks and government authorities, but also among different government agencies, could be subject to leaks. The panelists referred to the need for sufficiently secure IT systems and the appropriate use of modern technologies (e.g., artificial intelligence and blockchain technology) that could allow anonymous aggregation of big data information. Finally, in a similar context, the question was raised on how trust between different government agencies can be strengthened as an important prerequisite for information exchange. The panelists referred to both formal and informal models for cooperation such as MOUs, joint investigative teams, joint task forces, or joint training experiences. For the latter, the training courses offered at the JVI may be a good example, as they are aimed at a relatively wide range of public sector officials, in a wide range of subjects.

Markus Eller, Senior Economist, JVI



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