Emmanuel Saez on Tax Competition - Dictionary of Arguments
Saez I 109
Tax Competition/Saez/Zucman: In 2019, the International Monetary Fund asked a slate of experts for their views on the future of corporate taxation and tax competition. Most of the fund’s interlocutors answered that tax competition was “likely to intensify” in the foreseeable future.(1) Some countries, the experts agreed, will always offer lower taxes than their neighbors (...)
Saez I 110
SaezVS/ZucmanVs: This view is wrong. There is nothing in globalization that requires that the corporate tax should disappear. The choice is ours.
Saez I 111
To see how we could escape our current predicament, we must start by understanding why we have failed, so far, to address the fiscal challenges presented by globalization.
1) Financial globalization is a recent phenomenon. Close to 20% of the world’s corporate profits are made by companies outside of the country where they are headquartered today.(2) Before the 2000s, that figure was less than 5%.
2) (...) the activities of multinational corporations are opaque. Companies are generally not required to publicly disclose in which countries they book their profits.
3) (...) successful lobbying by the tax-dodging complex. The transfer pricing industry lives by the system of corporate taxation created in the 1920s; it has a vital stake in preserving it. For example, if companies, instead of being taxed subsidiary by subsidiary, were taxed as consolidated entities, there would be no point in computing the prices of transactions between subsidiaries. The transfer pricing industry would become obsolete overnight. >Tax Competition/Buchanan.
Saez I 114
SaezVsBuchanan/SaezVsBrennan: In the real world, the costs of tax competition far outweigh its supposed benefits. (...), there is no progressive income tax possible without a strong enough corporate tax, because with low corporate rates, rich people morph into companies and transform the income tax into a (hardly enforceable) consumption tax.
1. International Monetary Fund. “Corporate Taxation in the Global Economy,” IMF Policy Paper no. 19/007, March 2019. Appendix 1, p. 47.
2. Tørsløv, Thomas, Ludvig Wier, and Gabriel Zucman. “The Missing Profits of Nations.” National Bureau of Economic Research Working Paper no. 24701, 2018._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.