ABOUT THE AUTHOR: Martyn Gowar TEP is a Partner at
McDermott Will & Emery
Twenty years ago Yugoslavia was one country, but a country not
at ease with itself. Now, it is split into a number of independent
states including Croatia, Slovenia and Macedonia. The only things
that they could agree on were that, first, they wanted to have
nothing to do with each other, but secondly, they all wanted to be
part of the European Union.
I have been concerned that the tax system of individual
countries does not cater for the international wealthy because all
the concepts of domicile, citizenship and habitual residence were
the product of pragmatic social decisions based on 19th-century
economic realities, and take no account of the way in which the
world has shrunk over the last 60 years. Of course, the number of
people who are affected is very small, but in terms of being the
tax-payers of the world they do make a very considerable
difference.
And it is not just on individual taxes that the problem arises.
Many corporates also think globally and they work in and with
jurisdictions that are like chalk and cheese. We must remember that
tax systems are there to collect taxes, and taxes are collected
because the individual nation has financial needs that have to be
paid for.
Another fact that is so important is that emerging economies do
not have similar attitudes to wealth or indeed to democracy. In
short, all countries do not operate on a level playing field in
terms of needs, culture or aspirations.
All countries do not operate on a level playing field
in terms of needs, culture or aspirations
Yet, individual families and individual mobile tax-payers
sometimes find different attitudes refreshing and enabling. The
trend has been, as it seems to me, that we have moved from families
to tribes to cities to nation states – and now we move to
organisations like the Federal United States of America and the
European Union. All look at a bigger model to protect their trade
and their security. And yet the paradox is that the bigger the
unit, the more the individual wishes to feel a part of a smaller
unit where he or she can make a difference and feel valued.
In building a revised tax system that will be fit for the 21st
century, as I strongly believe that nations are going to have to
do, I hope that the smug assumption of the OECD that countries have
a right to intrude ever more extensively into the affairs of their
individuals will be questioned, and that the discussions that are
beginning to take place in terms of talking about territorial forms
of corporate taxation might be looked at as offering a model for
individual taxation. For the realities behind them are the same, in
that a corporation as well as an individual is a unit that has
rights as well as responsibilities in respect of tax.
The paradox remains – how can you match the financial
requirements of individual countries with a more global taxpayer
base for whom the rules of fiscal obligation to a particular state
are often increasingly arbitrary and artificial?