tax-sovereignty-and-the-eu

The podcast discusses international tax agreements and the introduction of a global minimum tax to combat tax avoidance. Despite challenges like US opposition under Trump, a deal was reached in 2021. The success of this deal, involving 147 countries, is seen as a significant achievement in global tax cooperation. The conversation also delves into the need for Europe to reevaluate its tax system to align with common EU priorities, with a particular focus on the balance between labor, consumption, and capital taxes. The EU Tax Observatory project aims to address these tax challenges and promote fair and effective tax policies in Europe. Hello, and welcome to the Sound of Economics, the podcast from Google, the Russell-based economic ventures. I'm your host, Rebecca Christy. I am joined today by two of my fantastic Google colleagues, Pascal Saint-Amand and Roul Dom, and we are going to be talking about tax, specifically the world of international tax agreements, which is fraught with drama and intrigue, and also the battle to pay for all of the things that Europe needs at the European and national level, and how taxes play a role in that. Pascal, tell us about the international setup. We had this global tax deal that you were very much part of in your prior work at the Organization for Economic Cooperation and Development, then it ran into some speed bumps internationally. Now, at least on part of that, we're moving forward. How are we doing? Hello, everybody, first, and maybe we've lost half of the people when you said tax, but it's exciting. So please bear with us. What has happened is that if we do a fast forward from a century ago, we had an international tax system based on bilateral relationships following the global financial crisis in 2008. There is a tax reform, an international tax reform, which came up with tax cooperation, countries talking to each other, and ultimately adopting a global minimum tax to put an end to aggressive tax avoidance, tax evasion. And these global minimum tax, which is the outcome of 15 years of negotiation, provided that multinational companies, wherever they are in the world, should be taxed at a minimum of 15% effective, right? And this deal was landed in October 2021. It was one of the top priorities of President Biden. And guess what? President Trump was not in agreement that American companies would be subject to 15% minimum tax in other countries than the US in case they would have profits located in Cayman or other low tax jurisdictions. And President Trump on his first day in office said, I withdraw from the OECD deal. By the way, President Biden failed to get it approved by the US. The US was not implementing the minimum tax, but as a result, other countries may have taxed on the tax profit of American companies that's in Cayman. So an American company is having $1 billion of profit in Cayman taxed at zero because there is no tax there, would have had a $150 million tax in Europe or elsewhere to compensate that. So Trump said, you cannot do that. And if you do that, I use weapons against you. In that case, it was a threat of retaliation tax. And then the G7 started negotiating a deal by which they said, we agree that the US, which, by the way, under Trump won, was the first country to introduce a minimum tax, which is called GILTI. That's a funny name provided by the Republicans at that time, but GILTI is a bit less. It's 12.6% instead of 15, and it's computed on a global average instead of a national average. But Trump said, we have that, so you don't tax our American companies. And the Europeans, the Canadians, the UK, the Japanese, the Korean, the other 40 countries which implemented the minimum tax said, OK, you're stronger than we are. We agree with that. But we want to insist that American companies will not be protected from the minimum tax in low-tax countries which have decided to take the 15%, because you have a complex mechanism with three tiers. It's either the US taking it or the Europeans, or in the between, if Cayman decides to take the 15%, the US has agreed that Cayman could do it. And we have currently many low-tax countries which are taking the 15%. Cutting short the long story, the US has obtained from their partners some form of sheltering of their American companies from the minimum tax. I said some because it's not complete, and we'll have to see on the way forward what's the implication on the minimum tax surviving or not. Thanks for that overview. The key that I take away is that surviving is still in play, because there have been several moments over the years when this thing seemed like it was done for. Pascal, is that overall a global ban that we're still here? The fact that you have 147 countries agreeing such a deal after a year of trouble, I think we can use that understatement to describe the geopolitical environment, is a win. I mean, you know, tax has been the success story of the G20 since 2008. End of bank secrecy, automatic exchange of information, the BEPS work, people may remember profit shifting, a series of 15 measures approved, multilateral instruments, hard-law instruments approved, a multilateral convention on mutual assistance, a multilateral instrument to change bilateral treaties. All these are concrete changes which have happened, and the global minimum tax was kind of the end of the road there, and seeing unfolding would have meant that the whole infrastructure of tax cooperation, which had been built, would collapse. And here, again, one year after Trump started his presidency, you have all the countries of the inclusive framework, 147, including China, agreeing a set of rules which are asymmetrical. I mean, the U.S. gets a better deal than the others, even though the deal may be open to the others, if they follow suit or the U.S. put in place something like GILTI and so on. So, is it success? It's a bitter success, I would say, bitter because it's asymmetrical, it gives a competitive advantage to American companies that they always had something like that in the past because of the power of the U.S., the power game, but it's success to the extent that you bring all the countries together, or you keep all the countries together. And in today's world, having such a deal is not bad, I must say, so bitter success. And we're still talking, and we'll come back later in this podcast to the other half of the OECD debate, which is still at an earlier stage of the process. Pascal, you mentioned a lot of the information sharing advances of the past years and the attempts to stamp out tax fraud. Whenever governments need to raise money, the first thing they say is, well, instead of new taxes, we're just going to make sure everyone pays the taxes they already owe, so we're going to share information, we're going to get rid of fraud, and that will bring in some money. Great. At a certain point, however, you have to look at your actual taxes, not just the gap between what your taxes are and who's paying them. Ruhl, you and Pascal did a report on what Europe can do to make its tax environment work better. Would you like to tell us about that work? RUHL RASMUSSEN Sure. I'm very happy that we're talking about tax. We don't do that enough. One thing I think is striking is that we're not talking about tax given the amount of attention we give to the spending side. Across Europe, we keep agreeing on new common priorities, from climate to security to defence to competitiveness, but we do so without really talking about how we will align our financing architecture, the revenue side, to support those common EU priorities. I guess, to me, there's a real question about whether our existing financing framework is designed to support those common EU priorities, and that brings me, at least, to the tax system. How are we taxing our tax levels where we want them to be? How are we raising that revenue, and what is the structure like? If you look at those different elements, I think if you start with tax levels, then what you see across Europe is that, internationally, they stand out. We tax, on average, about 10 percentage points of GDP more than non-EU OECD countries. Of course, this reflects many things, different preferences for social spending, for wealth estates, and whatnot. I guess, the more interesting question is about this tax mix that is the structure of taxation. How is labour taxes, how is that compared to consumption taxes and capital taxes? Now, there, I think what is striking is that there's actually been very little change over the past couple of decades, despite emphasis on increasing things like labour supply, increasing competitiveness. Labour taxation, for example, still accounts for much more, or for about half of total revenues, whereas capital tax revenues represents a much smaller share. For example, despite our emphasis on our climate conditions, our mental tax revenue as a percentage of GDP is actually decreasing. This pattern, and I'll come to your question, this pattern is also visible in the EU level tax policy advice that's coming out of the country-specific recommendations. Indeed, Pascal and myself, together with the help of our colleague Constanza, Constanza Lombar, Maturana, and Greppi, we looked at these trends across time, and we see that, indeed, tax policy recommendations have also shifted away from labour taxation and consumption tax to capital taxation and tax administration, and this is consistent with sort of evolving EU priorities, if you want, EU policy objectives. Now, the striking thing here is that implementation hasn't followed. So, despite these recommendations, we see that only 14% of those are actually implemented. Now, what this tells you is that, or what this tells me, at least, is that Europe keeps asking tax systems to do much, much more, focusing on supporting growth, supporting fairness, supporting the green transition, but fundamentally, tax systems are not changing in the same way, and they are actually fundamentally staying quite the same as they were, let's say, 20 years ago. It's a big challenge. The two of you have recently embarked on a huge new project for Bruegel and for Europe in general. Pascal, tell us about the tax observatory. The EU tax observatory is an initiative that the EU Commission launched years ago and which focused on what they called the tax gap, which was kind of the work that the OECD carried out for years on fixing the gap, so putting an end to bank secrecy, organising tax cooperation or fighting the tax avoidance of multinational companies, and Gabriel Wittmann with the Paris School of Economics was leading the EU tax observatory, and he's still leading because he won the bid regarding this part, but the Commission decided to do a new branch of the EU tax observatory, and they asked a consortium to apply for that, so Bruegel took the lead of a consortium involving many prime universities in Europe, from the Vienna University, also Oxford University, which is very good at corporate income tax, Amsterdam, Copenhagen, Rotterdam, and a few others, Madrid, and this is about tax competitiveness, it's a bit what Jul has just indicated, how do you reconcile, which I believe is the main equation of our times that we need to solve, how do you reconcile reducing inequalities which are undermining the social contract, and we can see the rise of populism or pre-revolutionary situations in some countries because of this rise of inequality, so how do you address that while protecting the social systems, and foster growth, and so far, I believe economists have kind of failed at that, because they have not been able to bring these together, so either you have the simplified approach, oh, if you want growth, reduce capital taxation, especially in an environment where you have tax competition, or you have the left-hand side, I would say, saying, oh, we should tax capital, we should tax wealth and all that, how can we get smarter at that, and provide the European countries more than the Commission, because tax policy is primarily domestic, but we cannot do smart domestic policies if we don't take the European dimension, and it's missing, and this tax competitiveness bit, with this new branch of the EU Tax Observatory that we will be leading at Bergel, is extremely exciting, it's a three-year plan, and we intend not only to have articles on these questions, including greening the economy, you may remember climate change, I mean, for the past year, we're kind of forgetting about that, because of the influence of the US, but how do you green the economy while fostering growth, how do you reduce inequalities while fostering growth, how do you improve the productivity in Europe while ensuring the social network that we have, and this is what we will be working, and we're very excited, we intend to launch it sometime in March, and the goal is to make Europe not only great again, obviously, but also the place where you will have a debate on tax policies. And speaking of the debate, there is a second half of the Tax Observatory, can you just briefly tell listeners what's happening on the other side of this giant project? So the other side is the tax gap, which I mentioned, led by Gabriel Zipman, who is well known to promote a global minimum tax on wealth, and Gabriel keeps this work on track, they're organising soon a conference on taking stock of the impact of automatic exchange of information, which has been quite massive, and we'll be working with these two legs, or two branches of the EU Tax Observatory, but we are extremely excited, again, to trigger a tax debate which will go beyond borders, it's not only the pure domestic tax debate, with a good economic dimension, to inform the countries, to inform the public, yes, the people of the countries, and to make sure that it resonates in Europe and beyond Europe. Thanks for that, we will be looking forward to these developments, and listeners can follow along on our website, google.org, we'll be posting links and announcing things as they come together. In the next part of our podcast, I'd like to bring our lens back to the European Union a bit. We are entering the next seven-year budget cycle, we'll spend the next two years debating how the EU is going to fund itself for seven years, which involves looking at national contributions and also looking at what they call the own resources, the taxes and charges and guarantees that make up the money side of the EU's spending. Roul, how do you see this debate emerging? It's one of the key debates, I think, going forward over the next couple of months. You're right, over the summer, the Commission put out its proposal for the next MSF, for next multi-annual financial framework, and that includes a couple of proposals on new own resources. Quickly, going over them, you have one on the EU Emissions Trading System, where it's proposed that I think 30% of revenues will now be allocated to the European budget. You have a proposal on the Carbon Border Adjustment Mechanism, where about 75% of revenues will be allocated to the EU budget. There's a proposal there on non-collected e-waste, so that's a statistical resource. There's also a proposal on tobacco excise, of which a part will come, or is proposed to flow to the European budget. And then there's also a levy on annual turnover for the largest companies, that was proposed as part of the new own resources. Now, looking at those proposals for new own resources, I think there's a couple of points to be made before we delve into the specifics, and that's one, there's no such thing as free money. And I think we've debated this quite a number of occasions, but all this money ultimately comes from European citizens, whether that is through national budgets, through levies, through taxes on corporates or individuals, but also, and this is perhaps more important and often overlooked, is that as long as we don't increase the budgetary ceiling on how much we can spend at the European level, all that introduction of new own resources does is basically lower the GNI contributions that countries have to make. So in that sense, new own resources, rather than bringing in extra money, are merely changing the distribution of efforts across countries. And that's, I think, an important thing to know before we delve into this discussion. So to me, it's not about can we invent so much new tax. I think there is, maybe even too easy, inventing new tax, if you look at all the proposals out there. But it's more about, and Pascal referred to this as well, can we design a financing architecture that supports European policy priorities and European public goods. And I think there, it's important that we focus on the design, but that we're also careful with, for example, some of the proposals that may look rather simple, but may actually turn out to be economically rather messy. And I'm thinking specifically of, for example, the core levy, so that's the turnover-based levy on companies of a certain size, which was framed as, or these companies were framed as benefiting from a single market. I think that this could be economically distortionary, and this may have unintended consequences. And over the summer, we published an analysis where we argued that perhaps this proposal should be withdrawn, in part because it may be perceived as unfair, because companies with different abilities to pay are actually impacted in the same way. Now, does that mean that there is no space for new loan resources? I don't think so. There is a chance here to introduce well-designed new loan resources to the extent that they support common EU priorities. We floated one idea, which was a defence shortfall levy, where you would link a new loan resource, EU revenue, to a shortfall on something that we consider a EU priority, or public good in this case, spending on defence, where you would sort of use a defence spending benchmark as the indicator. Now, this has the dual advantage that it doesn't only link your revenue system with EU policy priorities, but it may also reduce this logic of the just retour, or the net balances, by shifting away the conversation about how much is a country actually paying, to a conversation about how is a country performing with respect to some sort of a policy priority. I think here, for me, the message would be to focus less on maybe on the level, but more on the structure of the revenue side. Thanks for that. We've done a couple of podcasts with your co-author on that budget blueprint, Jill Bravish, where he did single out that the corporate levy is something that might be a proposal worth rethinking, and we will link to those in the short notes, as well as the blueprint itself. Interested listeners in the MFF, particularly if you're interested in the spending side, you should go check those out. Coming back to the money coming in, you mentioned that we're looking at sort of the division between revenues coming in and guarantees that are calculated based on gross national income, and also on debt now, we're looking at the EU servicing and deciding whether to extend or reduce the outstanding joint debt that it has to pay for the pandemic recovery next generation EU program, some of the aid to Ukraine and other things like that. Pascal, can you give us a little bit of a historical perspective? It was so revolutionary when NGEU was launched during the pandemic to start borrowing, and at the time, one of the ways leaders made peace with it was by saying, we're going to bring in new own resources, and they mentioned the carbon border adjustment mechanism, CBOM, they mentioned, I believe, a plastics tax, and they also mentioned a digital services levy of some kind. How do you think that declaration looks in hindsight? And where do we stand on the own resources that they promised to bring in? Yes, indeed, that was quite revolutionary, right? The European Union going to the markets issuing bonds and having its own debt, with the question now being raised again with Ukraine, as we all know, and also, would you expand next generation EU? And the agreement was based on the fact that you would indeed have new own resources. Where do we stand on that? Well, there is some progress. I mean, as the rule has explained, that's extremely important to understand. When you talk about own resources in the European Union, you're talking about the budget. The budget is fed with own resources, and the GNI contribution is an own resource. So there is something wrong with the words, and that's so misleading. So I have to say that before responding to your question, because people may be confused. When you think own resources, you think that you own the resource, right? It's yours. So the European Union, does it collect a tax, which would be its own resource? The answer is no. There is no such thing as own resources currently in the European Union. The European Union is fed by contributions from the members. So the question about own resources is, can you do genuine own resources? You have the genuine, to bring sense to the expression, own resources. Genuine means you really own it, right? You have your own tax, and on that, there is some progress. There is some progress with the likelihood that CBAM, the Carbon Border Adjustment Mechanism, will be in part allocated to the budget. And the logic here is the same as custom duties. You know, when you have tariffs, you collect custom duties, and the custom duties are precisely an own resource of the European Union, and a genuine one, because you collect something, you collect a tax, you collect a levy, when some goods come into the common market, the internal market. And even though it's the national custom offices which collect the tax, it goes, subject to pretty big part kept, I think it's 20 plus percent, kept by the countries, it goes to the EU budget. And the CBAM is a bit the same logic. The CBAM is a Carbon Border Adjustment Mechanism. When some steel or some aluminium which was not taxed or priced in terms of carbon, whose carbon was not priced before it enters the European Union, the EU will take the difference between the price on the EU market of carbon and the price which was levied by the country. And very often, it's zero. So the European Union will collect that. So CBAM, I think there is agreement that CBAM should go to the European budget as a non-resource. We'll see whether it happens, but there is consensus. And it fits pretty well the idea that own resources should fund, the genuine own resources, should fund new public goods, and fighting climate change is a new public good, and it's better developed, deployed, implemented at the EU level than at the national level. So that makes a lot of sense. So progress to be expected there. Progress already made with the plastic levy, the plastic tax, plastic waste tax. So if a country is very bad at eliminating plastic, and there is plastic waste, it will pay a levy. So it's not really a tax, it's called a tax, it is not, it's a contribution based on statistics or based on the actual waste of plastic, and this was adopted. So it's not only expected progress, it's realized progress, and that was the last own resource adopted by the European Union back in 21, if I'm not mistaken. And finally, you mentioned the DST, digital service tax. We started the podcast with the global minimum tax as a great success back in 2021 with many countries agreeing it. Actually, they agreed on it as part of a package, which was a two-pillar package. You had pillar two, the minimum tax, and you had pillar one, which was how to tax the digital companies, or how to reallocate taxing rights among countries so that the countries where the most successful companies in the world, the tech companies, the semiconductor companies, the luxury companies, pharmaceutical companies, the largest and most profitable companies in the world, would be taxed on their rents, on their, I mean, on their excess return, the big profits, I don't know how to call it, but the juicy profits, right, they would be taxed more on the market. And for the Europeans, what does that mean? It means that, yes, the Chinese may tax the French and Italian luxury business a bit more than they do currently, but it means that the Europeans would tax the tech companies more than they do today. So the US would give a part of the rent and the Europeans would get part of it. That was part of the deal, 2021. Five years later, where are we? Well, there is an agreement on how to do it. There is an agreement on how to write a multilateral convention which would be needed to implement it, but there is no agreement to sign this instrument and to implement it. And the DSTs, the digital service taxes, were already five years ago, more than five years ago. It started in 2018-19. They were the way for countries to say, as the Americans, we'll never sign a multilateral instrument, and therefore we cannot tax the profit of these companies because our tax treaties don't allow us to do it. We'll do it unilaterally through digital service taxes. The EU Commission on Next Generation EU said, well, we should put in place a digital service tax in the European Union or take a percentage of the global agreement if there is a global agreement. There is no global agreement and there is no European digital service tax. You just have digital service taxes in France, in Spain, in Italy, in Hungary, and in a couple in Austria and a few other countries, but it's not European. And guess what? The US said, if you do that, we shoot you dead, or kind of. I mean, they are going to take serious measures to fight this, and that's where we are. So will Europe try to do a digital service tax or take part of the global deal? There will be no global deal for the time being, and I guess that the countries which are the most sensitive to trade, Germany and others, are not so keen to take unilateral measures. So here, no success, no progress, but we'll have to see what happens, and if I may add a last note to that, I guess that artificial intelligence will probably trigger this debate further. Not that AI companies would immediately make massive profit, they are currently making massive losses, but at some point they will make profits. And the question is, who's going to tax these profits? Will it be, again, the Americans, or will it be shared with the Europeans? And here it's even more sensitive than was the case with the digital platforms, because with AI, you will have a disruption on the labour market, which will cost a lot of public money to the governments of Europe, because we have a social net, right? So they will see an increase of the expenses, but they will not tax the profits of the American or Chinese companies providing the services, which will increase the tension in international relations on how to tax these companies. So in response to your question, plastic tax, done, Sibam, probably soon to be done, digital taxation, don't see it yet. When I was first learning about this stuff, people told me tax policy is social policy, and I try to keep that in mind in understanding the role of these things. I want to ask you guys just some nuts and bolts questions about the EU. Pascal, you were mentioning that the plastics tax isn't really a tax, it's a levy. My understanding, and correct me and explain it better to listeners as I'm wrong, is that Sibam and ETS also are not taxes, strictly speaking, they are regulations that generate money. Why is this important? Because when you do some sort of EU regulation, you're involving the co-decision full set, the European Parliament, the Commission, the member states, and they have to sit down and hash it out. Other things that are sort of true tax policy measures have to be done only by the member states and only via unanimity, so the Commission can propose things, but only the member states can take them forward. And then on top of that, once the member states are collecting a tax, they get to decide what to do with it, whether they keep it, whether they pass some on to Europe, or how that works. Is that an okay overview of how the system works? It is. No, no, it's an accurate one. I tried to summarize it with a policy slash political dimension. What you're saying is that tax remains mostly domestic, if not exclusive. So that drives us back to fundamental principles like consent to tax. So let's step back. Tax is core to sovereignty. Consent to tax is what makes a nation, and we don't have a European nation yet. So the member states, when signing on the treaties, said, well, we agree to have a qualified majority in a number of areas, but not on tax. Tax is core to our sovereignty. We can agree common rules, and there are some on indirect taxation, on VAT. You have the framework, you have common rules on that, even though it's not fully harmonized. But on direct taxation, you do not have a base in the treaty to harmonize direct taxation. You can do it for the interest of the internal market, so it's indirect, and it's very little because you need unanimity. Unanimity is the translation of the fact that tax is core to sovereignty, and consent to tax is exercised at the national level, not yet at the European level. And as a result, what you have is a system by which you need all the countries to agree, and that explains that you have very little direct tax harmonization in Europe. You were talking about CBAM and ETS, the emission trading system, and the carbon border adjustment mechanism. What's interesting there is, how do you put a price on carbon? You can tax it, or you can do a market, right? And Europe had to do a market, because there you didn't need unanimity, while if you had to introduce a tax, you would have had to convince everybody around the table, including the Eastern European countries, which are more sensitive to that for obvious reasons, because they would suffer more from putting a tax or price on carbon, and as a result, the European Union decided to go that way, not because it was the best, maybe it was the best, but mainly because they couldn't do tax. So Europe is, on tax, a bit crippled in terms of taking unanimous decisions, and paradoxically, and a bit sadly, I would say, the progress in Europe on direct taxation has been big over the past 10 years, but because they just copied-pasted what the OECD was doing. Why? Why is it the case? Because Europe has to move, it has to move without harming its competitiveness with the rest of the world. So if you decide to, let's take an example, put an end to bank secrecy in Europe, and you just start trading Europe, all the money will go to Switzerland, which is not part of Europe and which has bank secrecy. So you need to level the playing field, and only the OECD, by bringing all the countries across the world, was able to provide for the level playing field, and once it was assured, Europe could move, and that's why Europe copied-pasted what the OECD did. So our hope is that Europe could take the lead, and as we said earlier, talking about the new tax observatory, I'm not sure that Europe will take the lead on deploying tax policies which will supersede domestic legislation, but Europe could be something like a think tank, I mean, the mega think tank, helping countries to move in the right direction on tax policies. So we need to find this, and we're part of this hybrid construction, right, EU hybrid construction, where I believe all together we can be stronger, not necessarily by harmonizing the taxes, but by having coordinated, well-coordinated systems with common rules, and the EU Court of Justice, of course, applies the non-discrimination principles and so, which allows us to go a step further. So, yeah, what you described was exactly this fact that tax is called to sovereignty, you need unanimity, and therefore you cannot necessarily do much altogether. It's super interesting, and the OECD has most of the European Union countries in it, but not all of them, and the countries that are formal OECD members are a smaller group than the ones that signed on to some of these bigger deals that you talked about. There's really a lot of overlapping networks here, also for American listeners, VAT is of course the value-added tax, which is the European sales tax, broadly speaking, that we have over here, that's included in the price of both goods and services. Maybe I can interrupt you with my European accent, and stuck you with your American accent. VAT is not a sales tax, I mean, sales tax is an awful tax implemented by the Americans because they are unable to move to VAT for different reasons. So yes, it's a tax on consumption, but it's not a sales tax, it's a mechanism by which you eliminate double taxation, it's an extremely smart tax, not because it was invented by the French, it was in the 50s, but it's an extremely efficient tax, and what's very interesting, and that's why beyond the joke, I wanted to make the case, the Trump administration in particular does not understand VAT. And because you don't tax exports at that, and you tax imports, precisely to ensure neutrality, the Americans say, hey, this is a tax which discriminates against the trade rules, and we need to penalize you for that. So no, it's not a sales tax, it's a much smarter tax, and one of the issues of the US today, we don't have to deal with that, but that's a serious issue, especially with deficits growing. The US needs to collect money, and only VAT would bring the money, and the reason why you don't have VAT is that the Republicans think that VAT is a big government, they don't like it, and the Democrats think that VAT is regressive, which is partly untrue, partly true, and that's why they don't like it. So sorry, I thought it could be an interesting transatlantic conversation there. I love this comment, and American listeners, if you're following the VAT debate, yes, absolutely, and it's going to be a fun one to watch in the US, because of the need for revenues, and the disagreement about how to tax consumption, do you do it via a strict sales tax or a broader consumption-buying-stuff-revenue-generating-mechanism? I want to ask you now, I want to sort of turn the crystal ball or the Rubik's Cube, and ask you, as someone who has worked in a national government, trying to sort this out, how do we get our heads around that? And particularly, what's useful to think about when thinking about how countries think about tax? That's a very good question. I think there's a number of dimensions which matter, right? If you're sort of an officer advising, both make it a two-standout. One obviously is the revenue. Governments, despite running deficits, still care about trying at least to balance their budgets. So the revenue impact is something that's paramount, and which is also increasingly important, I think, given the fiscal situation in which we find ourselves. The second one is impact on the economy, and specifically on jobs. This is an often-used indicator. Whether that's the most important one from an economic perspective, that we can be there, but the impact on jobs is something that's politically typically very salient, I would say. Less considered, and what I think at least should feature more, is the sort of broader economic impact. We don't, and I think this is true to an extent as well at the European level, we don't often see enough time and effort invested in doing the proper cost-benefit analysis of different tax proposals, looking at not just the direct, immediate impacts of a tax policy proposal on the revenue side and on the job side, but also thinking through some of the less obvious effects that tax policy may have, and that's something that we referred to earlier in this podcast on the core left, whether some of the indirect consequences of tax, and I think that's an area where we could potentially make, or where we could depart more from the cost-benefit side, and before we implement policy proposals. Thanks for that. We're closing in on the end of our time, in the last part of our podcast. I would like to ask each of you, what are some things to watch in the year ahead, and what are one or two things that you wish most people knew about tax? We've covered so much ground in this podcast, and if you could simplify a couple of points out of all of this to help people focus, I'd be really interested to know what you think we should know, what you think we should watch. So in terms of things to watch, it's hard not to mention UNFF. I think that's a big debate that we will be looking out for over the next couple of months, what will happen to the discussions on UN resources. We know that historically they've tended to be very difficult, so I'm very curious to see where they will land. So that's definitely something that also from the Google side, I think we will keep a close eye on. What's one thing that I wish we would talk about more when we talk about tax? And to me, that's a very first principle kind of question, and I think what we often tend to overlook is, and I think we mentioned it at some point at the beginning of this podcast as well, is that by taxing activities, transactions, we take away money from other actors in our society. And that's also why this is so close to sovereignty and debates about the fiscal contract and social contract. And I think that's really important because it also shapes the way you then can look at these things in terms of what's the value you actually get from doing this, and I think that should add up. We should be very careful in coming up with new taxes because of this, and we should be very careful about how we then spend that money that we take from pockets in our economy, be that from corporations or individuals. Thank you. Pascal? That's a good question. What to watch, I agree with Roul, the MSF would be interesting, but more on the spending side than on the unresolved side, but we'll have to watch that. More broadly, I believe the year to come, everywhere in Europe you will have a debate on capital taxation versus labour taxation. How do you get the right balance there, which should foster growth while reducing inequalities? And that's really a conundrum that governments across Europe are facing. I believe that digital taxation will come back in the debate. Countries remain frustrated not to get their fair share of the levy on digital companies, so that's something indeed to watch. Finally, I would say, as Roul indicated, that tax is a means to fund a society. So the debate on tax shouldn't go without a debate on how you spend the money, and that's true in the different EU countries. And the last thing to watch, come on, is the EU Tax Observatory on tax competitiveness, and we'll feed you with many more podcasts, papers, articles, conferences, which will make everybody in love with tax. Thank you so much. You've been listening to The Sound of Economics from Prugal with our tax experts, Pascal Saint-Honorand and Roul Gomm. I'm your host, Rebecca Christy. I will plug my own paper on the future of taxing robots, which I wrote a couple of years ago, and because it's about the future, it is still of some interest. We will link to all of, or many of our papers and past projects in the show notes. I hope that some of you will fall down some rabbit holes and spend some time thinking about this really interesting and very dramatic and intriguing part of our society when you dig into it. Thanks so much. You can find all our stuff on our website, prugal.org. We'll see you next time.