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Monday, March 28, 2011

The Corporate Tax Race to the Bottom

Jeff Sachs calls for an end to cross-country tax competition:

Stop this race to the bottom on corporate tax, by Jeffrey Sachs, Commentary, Financial Times: ...With capital globally mobile, moreover, governments are now in a race to the bottom with regard to corporate taxation and loopholes for personal taxation of high incomes. Each government aims to attract mobile capital by cutting taxes relative to others. ...
The end result is that both the US and UK are battling deficits of about 10 per cent of gross domestic product. ...We surely need to reduce the deficits but in a fair, efficient, and sustainable manner, by levying higher taxation on the rich, who are enjoying a boom in living standards and a share of the national income unprecedented in modern history.
Yet to get to the right place, countries cannot act by themselves. ... Multinational companies and their disproportionately wealthy owners are successfully playing governments against each other. The game is clear, and it is working fiercely well.
As a starting point, the Organisation for Economic Co-operation and Development countries should urgently convene a meeting of finance ministers to enunciate ... that tax and regulatory co-ordination across countries are vital to prevent a ruinous fiscal race to the bottom.

Without some sort of enforcement mechanism, I'm not sure that agreements like this will do a log of good.

    Posted by on Monday, March 28, 2011 at 10:53 AM in Economics, Taxes | Permalink  Comments (42)


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