An academic report from RMIT University School of Economics, Finance and Marketing provides extensive evidence that the corporate income tax system is not ‘broken’ and that it is not being eroded.
Commissioned by ACCA (the Association of Chartered Certified Accountants), the report Multinational corporations, stateless income and tax havens asserts that there is no evidence to support the belief that that UK or the US corporate income tax base is being worn away.
The report also states that advanced economies face a fiscal challenge, which creates the environment for a ‘tax grab’.
Sinclair Davidson, author of the report and professor at the School of Economics, Finance and Marketing at RMIT, says: 'The argument is that the corporate income tax base is being eroded by aggressive tax planning by multinational corporations – yet the evidence to support this argument is lacking. It is one thing to point out that multinational corporations do not pay tax in some jurisdictions but that says nothing about the actual corporate income tax base. To the extent that corporate income tax revenues have fallen in recent years, this is more likely to be a result of poor economic conditions than aggressive tax planning.'
Chas Roy-Chowdhury, head of taxation at ACCA, comments: 'This paper may well show that the global corporate income tax system is not broken, but questions remain about the evasion/avoidance/aggressive tax planning debate. ACCA has always been clear - tax evasion is a criminal activity and ACCA believes companies should not, in principle, pursue aggressive tax avoidance. Multinationals need to be clear about the value they bring for the benefit of their shareholders and wider society, and to communicate to all stakeholders their underlying commitment to the building of a sustainable business. Companies must see the management of tax obligations as part of that process of creating long-term value.'
Sinclair Davidson concludes: 'My report ends by saying that multinational corporations add value to both their home economies and their host economies. Tax havens add value by allowing multinationals to reduce their tax liabilities while increasing their investments in high-tax economies. An increase in their tax burdens would reduce those levels of investment, leading to reduced employment opportunities, reduced consumption and reduced innovation.
'It is not clear that tampering with the tried and tested norms of corporate income tax to possibly generate more corporate income tax revenue while reducing the corporate income tax collected in foreign economies, and possibly reducing investment, employment and consumption at home, is good policy.'
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Notes to Editors
- ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
- We support our 162,000 members and 428,000 students in 173 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of 91 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.
- Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.