Economy

KEY POINTS

·         In India, the government had reduced the corporate tax to 25 per cent from 30 per cent in the Union Budget of 2017-18 for most of the companies.

·         Last year, U.S has slashed corporate tax rates from 35 to 21 per cent.

·         The UK is also poised to press on with its one-percentage-point per year reduction in the statutory corporate tax rate, despite already boasting the lowest rate in the G7.

Need to stop decreasing rate

·         Tax is not only the price we pay for a civilised society, or the quid pro quo levied on the private sector for the provision of public infrastructure and a healthy and well-educated workforce.

·         Tax is also an essential safety valve which allows democratic governments to curb the power of unelected corporate leviathans.

·         The race to the bottom on corporate tax robs governments not just of revenue, but also of one of the most powerful policy tools to reduce inequality and promote distributions of income and wealth that are fairer and more conducive to ongoing economic growth.

·         By continuing their race to the bottom on corporate tax, governments run away from their democratic responsibilities and hurtle headlong into the next global crisis.

·         Further blunting the potency of fiscal policy are ongoing efforts by multinational enterprises to aggressively minimise and altogether evade their corporate tax responsibilities by using tax havens.

Solutions

·         The fairest and most effective approach is for multinationals to be taxed as single firms doing business across international borders.

·         Global profits and associated taxes could then be allocated according to factors such as the sales, employment, and resources used by the company in each country, rather where they locate their head offices and claim their Intellectual Property.

·         This global reform would strike a considerable blow for tax justice.

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