Star economists suggest roadmap for fairer global taxation

07 February 2018
The Independent Commission for the Reform of International Corporate Taxation has launched a new publication presenting concrete solutions to reorient the existing system of international taxation away from serving the wealthy few and to focus it instead on addressing the needs of the vast majority of the population.

ICRICT's calls for change have been bolstered this week with renowned economists Thomas Piketty and Gabriel Zucman joining Joseph Stiglitz and others on the Commission. The Commission will benefit from their expertise and strengthen its work on using tax reform to address inequality, income and wealth distribution.

After evaluating many alternatives, the new ICRICT report proposes clear solutions to a failing system: profits should be taxed where they are made and a global minimum corporate tax rate must be implemented. These measures will allow for all countries to collect a fair share of tax revenue from multinational enterprises and avert a race to the bottom.

José Antonio Ocampo, Chair of ICRICT said:

«Tax avoidance is about human rights. It is about people who are denied access to the services they need to lift themselves out of poverty because of tax avoidance. If large firms, including multinationals, and rich individuals don’t pay their fair share of taxes, it means no money for education, health care, infrastructure and fighting climate change. It is clear for everybody now we cannot count on foreign aid to address these questions. »

PSI’s General Secretary, Rosa Pavanelli, agreed with Ocampo stating:

«Tax competition harms global growth and drives up inequality. Recent scandals such as Paradise papers show that the current rules are rigged in favor of large multinationals who must stop trying to excuse their behavior by claiming its legal. The current global rules are immoral and must be changed. »

ICRICT's new report highlights how:

  • Global formulary apportionment, coupled with a minimum corporate tax rate, is the only effective way for all countries to collect a fair share of tax revenue from multinational enterprises and avert a race to the bottom.

  • Multinationals are groups of entities that are under single management control and have a single set of owners, and should therefore be taxed as unitary firms.

  • A unitary approach should apportion the multinational’s global profits to the different countries through a simple allocation formula, based on objectively verifiable factors. These factors, such as employment, sales, resources used, fixed assets, etc., should be chosen in a balanced way reflecting both supply and demand. Neither can create value without the other.

The Commission urges global leaders to adopt a roadmap towards this goal of global formulary apportionment with a minimum corporate tax rate, including short-term measures that are more effective, easier to administer, and provide greater certainty than the current defective methods.

About ICRIT:

The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is a group of leader from around the world who believe that, at this moment in history, there is both an urgent need an unprecedented opportunity to bring about significant reform of the international corporate taxation system.

ICRICT was initiated by a coalition of civili society and labour organizations, like the PSI.

The Commission is chaired by José Antonio Ocampo and includes Eva Joly, Rev. Suzanne Matale, Manuel Montes, Léonce Ndikumana, Ifueko Omoigui Okauru, Govinda Rao, Magdalena Sepúlveda, Joseph Stiglitz, Thomas Piketty and Gabriel Zucman.

 

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