ICRICT Support IMF Calls For Overhaul Of International Tax Rules To Stop Tax Avoidance By Multinationals

ICRICT Commissioner, Professor Valpy Fitzgerald,

The IMF paper “IMF POLICY PAPER CORPORATE TAXATION IN THE GLOBAL ECONOMY “published today states that the international corporate tax system is under unprecedented stress and allows $600bn of revenue losses each year due to tax avoidance (profit shifting) by multinationals. This negatively affects both developed and developing countries.

ICRICT Commissioner, Professor Valpy Fitzgerald, said:

“The report recognizes that capital taxation is essential for a progressive tax system, and that thus corporation tax must be maintained. This is particularly important to address inequality, as corporation tax targets the wealthiest who avoid tax by using tax havens.

“A radical overhaul is required and alternatives should be judged on their distributional impact. A move towards global formulary apportionment would benefit both developed and developing countries, if labour is properly weighted; whilst solutions only based on sales risk being detrimental for developing countries in particular.”

BACKGROUND INFORMATION:

Under the current rules, the scope for tax avoidance (profit shifting) remains high. This system has also fuelled tax competition and a race to the bottom in corporate tax rates.

The IMF finally acknowledges that fundamental changes to the current rules are required and they recommend that reform should fully recognise the interests of emerging and developing countries. Low income countries are especially exposed to profit shifting and tax competition and have limited alternatives for raising revenue. Their limited capacity is stretched further by the increased complexity of the current system.

The paper outlines alternatives to the current rules, acknowledging ICRICT proposals for global formulary apportionment as a possible solution.

The IMF has also stressed the failure of intergovernmental coordination to date (i.e. the rule-setting role played by the OECD), and the need to examine the impact on developing countries and to involve them in future negotiations and rule-setting.

ABOUT ICRICT:

The Independent Commission for the Reform of International Corporate Taxation aims to promote the international corporate tax reform debate through a wider and more inclusive discussion of international tax rules than is possible through any other existing forum; to consider reforms from a perspective of public interest rather than national advantage; and to seek fair, effective and sustainable tax solutions for development.

(Visited 56 times, 1 visits today)

Comments

comments

About Cholo Brooks 9244 Articles
Joel Cholo Brooks is a Liberian journalist who previously worked for several international news outlets including the BBC African Service. He is the CEO of the Global News Network which publishes two local weeklies, The Star and The GNN-Liberia Newspapers. He is a member of the Press Union Of Liberia (PUL) since 1986, and several other international organizations of journalists, and is currently contributing to the South Africa Broadcasting Corporation as Liberia Correspondent.