T20’s paper urges G20 leaders to take action to reverse the current tendency to engage in harmful tax competition
June 18, 2018
FOR IMMEDIATE RELEASE
New T20’s paper urges G20 leaders to take action to reverse the current tendency to engage in harmful tax competition and provide a level playing field for taxation and investment.
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is pleased to share a paper written by the T20 task force on Trade, Investment and Tax Cooperation, with the participation of ICRICT’s head of secretariat Tommaso Faccio.
The Think 20 (T20) is an open network which primary objective is to add value to the G20 process and to facilitate interaction between its members, the public policy community and the general public.
The task force on Trade, Investment and Tax Cooperation examines how to encourage a rules-based multilateral trade system that broadens the benefits of economic integration while providing the tools to protect those that are hurt by globalization.
The world is facing a new round of international tax competition that may result in a ruinous race to the bottom, undermining the fiscal capacity of states to respond to global challenges and to implement the Agenda 2030. G20 leaders must take action to strengthen multilateral and cooperative approaches to taxation, curtail harmful tax competition and protect their own tax base as well as that of developing countries.
The US tax reform of December 2017 threatens to trigger another round of worldwide tax competition, as other G20 governments may feel urged to adjust their corporate tax regimes as well. We see the risk of a downward spiral driven by three mechanisms:
• First, race-to-the-bottom corporate tax competition may involve lowering statutory tax rates as well as providing additional tax breaks for specific types of economic activity.
• Second, preferential tax regimes, distorting investment incentives and so-called anti-abuse rules as in the case of the US tax reform affect the level playing field significantly. If other countries react with similar measures, the resulting global tax structure could be even more complex and mutually harmful.
• Third, while tax cuts might boost economic growth in the short run, growing budgetary deficits could be a hindrance to growth in the medium term, as higher budget deficits would push up interest rates, which would discourage investment.
The T20 task force on Trade, Investment and Tax Cooperation paper urges G20 leaders to take urgent and decisive action to reverse the current tendency to engage in harmful tax competition and provide a level playing field for taxation and investment.
You can download the T20 task force on Trade, Investment and Tax Cooperation’ paper here.
After evaluating many alternatives, ICRICT also proposes a solution to taxation of multinationals. Global formulary apportionment, coupled with a minimum corporate tax rate, is the only effective way for all countries to collect a fair share of tax revenue from multinational enterprises and avert a race to the bottom. You can read more about it in our latest report.
For all media enquiries and interview requests with Tommaso Faccio, please contact our media relation officer Lamia Oualalou at email@example.com
ICRICT is a non-profit group of economists, tax experts and former senior officials which works to promote debate on reform of international corporate taxation, in the global public interest. Our latest report, “A roadmap to improve the rules for taxing multinationals” is here.
MEDIA CONTACT : LAMIA OUALALOU
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