rationalskepticism.org

Decades of tax wars among the world’s richest countries are unravelling the century-old global corporate tax system, new research finds. Forty per cent of today’s cross-border direct investments reported by the IMF – $18 trillion in value – are being booked in just 10 countries that offer corporate tax rates of 3 per cent or less.

The Corporate Tax Haven Index has revealed an aggressive dispossession of low income countries’ tax rights spearheaded by the United Arab Emirates, the UK and France. Out of all double tax treaties7 negotiated by jurisdictions ranked by the Corporate Tax Haven Index with low income and lower middle income countries, 75 per cent secured reduced withholding tax rates from low income and lower middle income countries that were below the average withholding tax rates those countries offered, in so doing stripping away poorer countries’ few defences against illicit financial flows.

The Corporate Tax Haven Index documents the sobering hypocrisy of the European Union. Excluding the UK, the EU is responsible for over a third (35 per cent) of the world’s corporate tax avoidance risks as measured by the Corporate Tax Haven Index.

Alex Cobham, chief executive at the Tax Justice Network wrote:“The hypocrisy revealed by the Corporate Tax Haven Index is sickening. A handful of the richest countries have waged a world tax war so corrosive, they’ve broken down the global corporate tax system beyond repair. The UK, Netherlands, Switzerland and Luxembourg – the Axis of Avoidance – line their own pockets at the expense of a crucial funding stream for sustainable human progress. The ability of governments across the world to tax multinational corporations in order to pay teachers’ wages, build hospitals and ensure a level playing field for local businesses has been deliberately and ruthlessly undermined.

“When our laws for taxing global corporations stop working, the global economy stops working for the vast majority of us. All around us we see inequalities go unaddressed, political extremism unchallenged and democratic institutions faltering – and the thread that runs through it all is a failure to defend progressive taxation. To curtail the corporate tax avoidance that costs hundreds of billions of dollars every year, governments must finally deliver international rules that ensure profits are declared, and tax paid, in the places where real economic activity takes place. Corporations should be taxed where their employees work, not where their ledgers hide.”