EKIP– Expert Club for Economics and Politics A Different Opinion
Cameron's government was forced to turn to business as the culprit for the tax gap - large companies such as Starbucks and Amazon were accused of avoiding taxes and paying less than their "fair share".
The implementation of social policies by states has its price, and politicians know this well. They have a limited set of options for financing state budgets. They must either issue debt, and most developed countries already have high levels of government debt to GDP, or raise taxes. Raising income taxes is definitely not a prerequisite for political longevity, especially in times of crisis. Britain, which already taxes the income of the rich with a progressive tax, would hardly justify increasing it. Thus, Cameron’s government was forced to turn to business as the culprit for the tax gap – large companies such as Starbucks and Amazon were accused of avoiding taxes and paying less than their “fair share”.
Blaming business speaks of a dysfunctional tax system; after all, businesses are simply acting rationally. In the UK, which, led by Prime Minister David Cameron, is the most active in the fight against tax avoidance, the basic rate of corporate tax is 24%, and for companies with revenues under £300,000 – 20%. In 1969, it reached 45%, which suggests that the islanders have made some progress since then. Such a high rate is a strong motivator for tax avoidance – something that those who can take advantage of. Thus, the attention of politicians is shifting not to optimizing the tax system at home, but to pressure on offshore zones and tax havens (tax havens) – countries with low or zero corporate tax rates.
David Cameron is not a pioneer in attempts to combat “harmful tax competition”. For more than 10 years, the Organisation for Economic Co-operation and Development, as well as individual countries, most notably the US, have been campaigning against low-tax countries. During this period, attempts to “expose” the income of companies and individuals who avoid taxes have been carried out with varying degrees of intensity. But with the UK assuming the G8 presidency, it seems set to gain momentum again. Cameron’s top priorities are trade, taxes and transparency.
What are tax havens? According to The Economist, these are about 60 countries or regions, mainly concentrated in the Caribbean, in which more than 2 million companies are registered. Companies registered there can benefit from various benefits – from anonymity of the owners of the registered company or anonymity of bank accounts to 0% corporate tax. Thus, companies, avoiding double taxation of income, achieve double non-taxation, according to the OECD, and the tendency is to increase pressure on offshore zones from countries offering “uncompetitive” tax conditions.
Offshore territories are also often criticized for offering good conditions for laundering money from terrorist or criminal activities – the most recent example of this is Cyprus. But this is a problem of the judicial systems of the countries in which the criminal activity takes place; the countries offering anonymity are not responsible for the crime itself. Determining tax policy is a sovereign right of the countries. Tax competition, low corporate tax rates and low requirements for registering a business or opening a bank account (such as disclosing the identity of the depositor, for example) lead to benefits for the countries that implement them.
These benefits are expressed in high investment and a well-capitalized banking sector. In turn, this leads to stability and prosperity – banks have more available funds to lend, and investments, which are not on paper in all countries with low corporate tax rates – to increased employment and wages, better working conditions and, ultimately, to an increase in the standard of living. If low corporate taxes did not have these advantages, they would not exist and a tax rate of 45% would certainly be a widespread phenomenon. It is not the fault of business that it avoids paying high taxes; it is the fault of the welfare state, whose programs these taxes must support. Until its role in society is reconsidered, or at least until tax policy is changed, companies will continue to seek tax havens and loopholes in the law.
The author writes a blog at the following address: http://totrants.wordpress.com/
