The report is entitled "Having Their Cake and Eating it Too: The Great Corporate Tax Break", and at 56 pages it makes for some serious reading to put it mildly.
One key finding from the report is that in the past 20 years, industrial countries have witnessed a 15 percent decline in the rate of corporate tax, a trend that reflects increased official backing for corporate interests. In just five years, from 2000 to 2005, 24 out of the 30 OECD countries have lowered their corporate tax rates. Only six OECD countries have so far kept their rates steady. And no OECD country has raised its rates in the period. On average, rates in all OECD countries have dropped from 33.6% in 2000 to 28.6% in 2005.
Of course, there is a world of difference between tax avoidance and tax evasion, and the authors of the report seem to see both as having deleterious effects in terms of government revenues. Tax competition among jurisdictions and the creation of tax shelters may be unfair, but if legal it is difficult to complain about their existance unless one is willing to take steps to close these loopholes.
As Oneworld report:
"Dismissing the argument that tax breaks are a must to attract foreign investment, authors of the report say their research shows that in many cases companies prefer to leave "tax haven" countries after making quick profits. Every year, the money lost to "tax havens" in developing countries is six times the amount needed to ensure that every primary-school-aged child in the world could get and education"
This is a graphic illustration of how much money is lost from corporate tax revenues. But the report also argues that the timing of these developments is particularly alarming.
From the report's Executive Summary (worth reading if like most people you don't have the time or inclination to read the entire report):
"The parallel tendencies of corporations sharpening their skills in tax avoidance and governments competing against one another in cutting corporate tax rates come at a time when economies and societies might soon need corporate contributions more than ever.
The continuing trend towards a global labour market has given capital an upper hand not seen since the industrial revolution and boosted profits to their highest level in decades. With current global labour reserves, technological developments and waves of market liberalisation and deregulation, the current context is characterised by stagnating wages and soaring profits, and the near future looks to be the same. Relying on the income and spending of wage earners to finance ever larger parts of public finances will either hollow out government budgets or lower workers' incomes.
Corporations increasingly base their success on institutional and societal competitiveness, in short the qualities of the societies they are part of, typically financed by public funds, rather than qualities they have built and developed independently of these. As a result, more and more government spending is used to enhance such competitiveness. Not just equity but efficiency considerations would suggest that corporations, not just their workers, should contribute substantially to the investments and expenditures that make them flourish.
Ownership structures of private business are becoming more international on a daily basis. This means that more corporate profits in the form of dividends escape national tax collection, and thus contribute nothing to the spending and investments necessary to maintain and extend institutional and societal competitiveness - a trend that from day one is undesirable for countries and their citizens, and in the long term even goes against the interests of the companies. If tax on corporate dividends increasingly eludes national taxation, then taxing corporate profits should surely be the first place to look for compensation.
The system of employer-provided welfare is disintegrating. From China to the US fewer and fewer employers are willing to provide health care and pensions.Welfare schemes are being scaled back and costs shifted to workers. As inequality grows, in a not too distant future governments may well have to patch up the social safety net by picking up more of this tab. That will require new public funds - and corporations should chip in their share."
The authors also argue:
"With corporate tax rates in industrialised countries falling from around 45% to 30% in a couple of decades and intensified tax competition in the new millennium, corporate tax rates are fast approaching rock bottom. Add to that the growing number of multinationals paying either no tax at all or being taxed way below statutory rates, due amongst other things to the rise of tax havens, and you might see a future where corporate profits are sheltered from having to make any kind of public contribution."
The full report addresses the following key issues:
How tax competition and tax practices drive corporate taxes to the bottom; How the increase prevelence of tax shelters facilitates corporate avoidance and evasion; How the decline in corporate taxes risks undermining future social stability;
And finally, and perhaps most importantly, the report discusses some possible solutions to avoiding a "future global tax crisis".
This is a serious issue that needs to be addressed by policymakers--and although the report is far from a balanced and complete look at all of the dynamics in play, it presents a good opening for future discussion.