Isn’t this an issue for governments?
Yes. Governments decide tax rates, tax credits and accounting laws. But it is also an issue for consumers and companies.
Governments can only control tax regulations within their own countries – while companies will continue to exploit laxer tax regulations abroad.
Certainly, rich countries should be plugging their own loopholes. Ireland, the Netherlands, Luxembourg and Switzerland all remain on our list of tax havens. The UK would be on there if we weren’t looking for companies that operate in the UK. Such countries cost themselves and other important revenue for public services, and desperately need to address the problem.
These countries should also be pursuing international agreements to address the issue as a whole. Without this kind of agreement, change will be incremental and poor countries will continue to have limited chance to respond.
In the meantime, if tax avoidance is an issue of human rights, corporations also have a responsibility to change. By demonstrating a willingness to pay fair taxes, companies can allow countries to charge fair rates as well as contribute to the national infrastructure and resources that they benefit from.
In the past, companies have not only avoided paying taxes, they have pushed for the kind of tax liberalisations that only make the problem worse. Last year, when Amazon announced plans for a second US headquarters, it made it clear that tax credits would be a key factor when judging bids.
As a result, Chicago offered to pay between 50% and 100% of its workers’ income taxes back to the company. Amazon employees would tax pay tax on their wages, but the revenue would go straight back to the multinational. New Jersey offered $5 billion in tax incentives. And Fresno in California promised to redirect 85% of the company’s taxes into the ‘Amazon Community Fund’ for the next 100 years – a pot that would be jointly managed by Amazon executives.
If governments should not be making these kind of offers, companies should not be asking them to make such an unsustainable trade-off between generating jobs and funding public services.