Monday, February 18, 2013

Corporate Tax Avoidance: Victimless Crime?

Even though it might be the reason why Mitt Romney lost the 2012 US Presidential Election, is corporate tax avoidance truly a victimless white collar crime? 

By: Ringo Bones 

For us in the have not section of the socio-economic ladder, the idea of corporate tax avoidance – where corporations resort to legal means to avoid paying their fair share of taxes is seen as a gross disregard of a for profit firm’s corporate social responsibility. And despite corporations thinking its just business as usual, such moves are not gaining them any favors from elected officials desperate for revenue in the austere fiscal environment of our post subprime mortgage crisis world. 

Earlier this year, Google and Starbucks were cited as examples of corporate tax avoidance where they got the practice of diverting their profits generated in a high tax country into one of their parent companies located in a low tax rate region down to a science. Their practice of shifting profits to lower tax regions had been costing the U.K. millions of much needed tax revenue needed to maintain the nation’s infrastructure and other vital social services. Even the CEOs of some multinational corporations – despite earning 20 to 30 times more than a typical public school teacher on an annual basis – manage to pay income taxes at the same rate as that of a typical public school teacher. 

U.K.’s Chancellor of the Exchequer George Osborne had been currently in discussion with his French and German counterparts during this G20 Summit in Moscow over how the practice of corporate tax avoidance had been bleeding the Eurozone dry of much needed revenue. Even though the U.K.’s legislated taxation laws is relatively progressive by global standards – i.e. the richer you are, the more taxes you should pay – corporate tax avoidance skews the very idea of establishing a progressive taxation scheme. And if big multinational corporations are allowed to practice corporate tax avoidance with impunity in the Eurozone, could large scale disenfranchisement of the masses and social unrest be not so far behind? 

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