Corporate taxation has quickly risen to the global political agenda. There are several factors behind this trend, after decades in which it became widely accepted that free capital would simply be deterred by “excessive” corporate taxation, which would therefore burden a labor force messy mobile – or simply lower, to the detriment of a so-called ‘ inefficient public services better provided in any case by contracting companies.
First, it is now clear that deference to capital in this respect did not only mean that this or that state would not suffer divestment. Instead, a global “race to the bottom” in corporate taxation has ensued, severely undermining the global tax base, while the need to invest in global public goods, including a viable ecosystem, has become all the more pressing. This was facilitated by opaque multinational accounting systems, which enabled, for example, transfer pricing and synthetic valuations of intellectual property to ensure that corporate profits were overwhelmingly concentrated in low-tax states.
Second, the release of liquid capital into secretive jurisdictions around the world has become less hidden from public view, due to the capabilities of modern, globally collaborative investigative journalism and big data, as reported by the “Panama Papers” and “Lux Leaks”. ‘. The enormous extent of this wealth capture has challenged any claims that the reduction in capital taxation has ultimately ‘trickled’ onto the world’s poor via investment and job creation.
Indeed, it became clear, thirdly, that low corporate taxation created perverse incentives for rent-seeking behavior on the part of shareholders and corporate managers, while dividend payments and compensation flourished for what was called the “1%”. Thomas Piketty showed in his famous Capital at 21st Century how what had been confiscatory tax rates on capital at the end of the second world war, especially in Europe, were replaced by a world in which “r > g”, with spiraling inequality as the inevitable result .
This trend has been amplified by the increasingly risky speculation in derivatives associated with an increasingly financialized capitalism – especially in its Anglo-American variant – in which companies “too big to fail” operate as if they had entitled to an implicit public subsidy. they bet the house and lose, leading to the emergence of “Occupy Wall Street” and its offshoots.
Finally, the digitization of capitalism in the 21st century created at breakneck speed a small number of Californian mega-corporations, benefiting from economies of scale and network effects so precursory that they quickly became not only national monopolies but global, capable of extracting huge rents while deserting large parts of the “ecosystem” of small and medium-sized enterprises in sectors ranging from media to bookstores.
This series therefore looks back at the different proposals that have emerged or are emerging to deal with this challenge, if and how they are viable and, if so, how they can be implemented, at least on a European scale and preferably on a global scale. .