Analysis shows that companies pay lower taxes than before the 2008 crisis, despite government efforts to reform the system
Author: Rochelle Toplensky, Financial Times, Published on: 17 March 2018
Big multinationals are paying significantly lower tax rates than before the 2008 financial crisis, according to Financial Times analysis showing that a decade of government efforts to cut deficits and reform taxes has left the corporate world largely unscathed...Governments' cuts to their headline corporate tax rates only explain around half the overall fall, suggesting multinationals are still outpacing attempts to tighten tax collection.
Drawing on 25 years of financial statements, the [Financial Times] examined the tax rates paid by the world's 10 biggest public companies by market capitalisation in each of nine sectors. The tax rates reported by the 10 multinationals with the largest offshore cash piles were also examined.The results show that the corporate contribution to public finances has fallen since 2008 as a proportion of profits...
The longer-term trend is even more pronounced, with effective reported corporate tax rates falling nearly one-third since 2000, from 34 per cent to 24 per cent...
The results highlight how the long downward trend in corporate tax rates set by the countries that make up the OECD continued at a time when taxes on consumers and workers were rising after the financial crisis.
Since 2008, countries have cut headline corporate taxes by 5 per cent while governments on average have increased personal taxes by 6 per cent, according to figures from KPMG, the accountancy firm.
"That's the process of competition [between governments] and I can't really ever see it stopping," said Michael Devereux, professor of business tax at Oxford university...More surprising has been the limited impact so far of a decade-long push in the OECD and G20 to simplify a web of national tax rules that enable multinationals to minimise their global tax bills.
Pierre Moscovici, EU commissioner for tax, said countries were free to set their own corporate tax rates, but highlighted that international tax reform was needed...The political desire to tackle this "profit-shifting" has been given more urgency because of the light shed on corporate tax arrangements by large-scale data leaks and political inquiries into the tax affairs of tech groups such as Apple, Google and Amazon...
National laws to implement the OECD's 15-point action plan to cut aggressive tax avoidance — through so-called base erosion and profit shifting — are starting to come into force. Mr Devereux expects new restrictions on interest charges between countries..."will show up next year [in the numbers] if it's going to have any effect". Other initiatives are expected to take longer before they show up in corporate results.