|The breakdown of
global consensus is a new entry this year
Brexit ranked third in last year's list while the election
of Donald Trump was 10th, and as the effects of the democratic
decisions become clearer, their ramifications for trade, tax
and economic relations as a whole are coming into focus.
But of course it's not just Trump and it's not just Brexit,
though they are two of the more obvious symptoms; western
democracy itself has been grinding its teeth and tearing its
hair out for several years now. People have been left behind by
the pace of globalisation, by neoliberalism and the failure of
trickle-down economics, by the self-inflicted 2008 financial
crisis. Moreover, the emerging and developing economies that
are strengthening themselves on the global platform and
establishing a voice for their interests has rattled the
western economies that have found comfort, for the last few
centuries, in the knowledge that they hold the power. Another
tipping point has been the migrant crisis, exacerbated by the
west's wars in the Middle East, which gave Islamic extremism
renewed impetus and, in turn, handed nationalism back home a
The result across western nations is fractured and broken
democracies, with voters shunning the centre ground and the
consensus which they feel has served them poorly for the past
10, 20 or 30 years. With politicians, as well as the public,
more divided than ever, tax policy (and government policy in
general) has become more extreme.
"Our collective inability to secure inclusive growth and
preserve our scarce resources puts multiple global systems at
risk simultaneously. Our first response must be to develop new
models for cooperation that are not based on narrow interests
but on the destiny of humanity as a whole," says Klaus Schwab,
founder and executive chairman of the World Economic Forum.
The plans for US tax reform have dominated conversation in
the tax world, being the biggest anticipated change since the
OECD's BEPS project. While Trump blathered and blustered about
"beautiful" tax reform, the rest of the world was intrigued by
the detail as his Republican colleagues put forward plans for
grand new systems like the destination-based cashflow tax and a
border adjustment tax.
These plans would, put simply, have turned the tax world on
its head. Tax planning would be transformed. Some say that
economies around the world would have had little choice but to
follow suit. Perhaps it would even have been a better
alternative to today's maligned and pockmarked international
Instead, it appears there will be a tax reform that
unashamedly slashes the taxation burden on the rich, makes
little attempt to be revenue neutral, and insidiously includes
sections that could force healthcare 'reform', plunging much of
the country into further health insecurity.
Brexit, in its own way, has been as polarising as Trump.
While 52% of the country – on a 72% turnout –
did vote to leave, the government has pursued the most extreme
form of Brexit possible, which many leavers would not have
voted for had they known more facts at the time of the
referendum. Many leave campaigners said that the UK would
remain in the European single market and the customs union, for
example, but all are now pulling in the direction of a clean
break with a heavy landing.
In France, the far-right Front National (proposing a tax on
companies hiring foreign workers) was defeated by a
newly-formed centrist party led by Emmanuel Macron. Just months
later, Macron's approval ratings are the lowest for a
newly-elected French leader for 20 years as he tries to push
through painful labour and tax changes.
Spain spent most of 2016 without a government after two
elections produced stalemates. It now finds itself in the midst
of a crisis with one of its most affluent regions trying to
Germany has been locked in coalition talks since its
inconclusive September 24 election with no end in sight. In
2013, coalition talks took a record 86 days and produced a
grand coalition. This time, the participants said the agreement
would not be renewed, but then changed their minds.
Hungary is increasingly autocratic under Viktor
Orbán. The populations in Italy and the Netherlands are
flirting with the idea of leaving the EU. Austria is close to
bringing the far right back into power, with the Freedom Party
of Austria wanting a 10% tax on newly-settled refugees'
earnings in the country.
Whether you're on the left, the right, in the centre or
don't vote at all, it's plain to see that democracy is
stumbling, and falling down ahead of it is the global consensus
by which our political, economic and taxation systems work.
This rocky road has shaken some of the most stable economic
societies of the 21st century. Tax and trade will play a
crucial roles as these nations look to steady the ships in the