Nov 20 2012

Me in the FT: a better way to tax corporations

Posted by: Nicholas Shaxson in: Thoughts

I have a comment article in the Financial Times today, co-authored with Professor Sol Picciotto, entitled Make Corporate Tax Rules Fairer For All. It’s  about corporate tax avoidance and unitary tax. It’s a fair bit shorter than what was submitted but still a good edit. The article states:

“The world’s tax rules have not kept pace with profound changes in the global economy.”

Then it goes on briefly to describe the hocus-pocus of international corporate income tax avoidance, and our original article (though not the published version) went on to say:

“The rules, dominated by the OECD club of rich countries, are supposed to tackle this prestidigitation by pretending that it is possible to set an “arm’s length,” market-determined price for these transactions, based on comparables elsewhere. But multinationals generally produce unique products and services and enjoy economies of scale and scope, so even the world’s most sophisticated tax authorities cannot find appropriate comparables. Developing countries find it nigh on impossible.”

The OECD’s methods are, as former top US international tax official Michael Durst explains, “based on a fundamental misunderstanding of practical economics.” The published version then notes a better, simpler alternative: unitary tax.

“Instead of taxing multinationals according to the legal forms that their tax advisers conjure up, they are taxed according to the genuine economic substance of what they do and where they do it.”

If you want to know more about unitary tax, see Prof. Picciotto’s draft paper here. A substantially edited final version will be available soon.

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[…] addition to my Financial Times comment article today, I have another article in a bulletin of the Association of Concerned African Scholars […]

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