Nine tax policy experts, including former government officials, tax professors, and a Nobel Prize winner in economics, in a report published June 2, recommended far-reaching reforms to the system of taxing multinational corporations, arguing that the current system is “broken” and must be changed.
The group, headed by José Antonio Ocampo, former United Nations Under-Secretary General and former Minister of Finance of Colombia, advocated moving to a system of formulary apportionment, adopting of a global minimum tax, putting an end to tax competition between nations, strengthening penalties for abusive tax practices, and requiring multinationals to prepare country-by-country reports available for public viewing.
The group also said that while the OECD/G20 base erosion and profit shifting initiative was a “step in the right direction,” developing nations nations should be provided with equal voting rights on the project’s output.
“Multinational corporations act and therefore should be taxed as single and unified firms – It is time for our leaders to be bold and recognize the legal fiction of the separate entity principle,” said Nobel Prize winner in economics, Joseph Stiglitz, following the release of paper.
Stiglitz recommended that until a unitary system is adopted, leading nations should impose a global minimum corporate tax to “stop the race to the bottom.”
Ocampo said that international corporate tax reforms should promote the global public interest rather than national or corporate advantage.
“This debate centers on equity: equity between good taxpayers and bad taxpayers, equity between capital and labor, equity between the rich and those living in poverty, as well as equity between countries, including between developed and developing countries,” Ocampo said.
The report was sponsored by the Independent Commission for the Reform of International Corporate Taxation, established by charitable and labor organizations.
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