Unstoppable worldwide business focus. Work prepared by economist Spencer J. Kwon (Harvard University); Joran Ma (University of Chicago) and Kaspar Zimmermann (Leibniz Institute for Safe Financial Research) conclude that in the United States, “corporate concentration has increased steadily over the past 100 years.” It identifies that the top 1% of companies own 97% of all assets, up from 72% a century ago.
The intense concentration of corporations has provided enormous power to large corporations which have used it to significantly reduce their tax contribution. The EU’s Fiscal Observatory highlights the sharp drop in the corporate income tax rate, which went from 50% in 1985 to 21% in 2020. The drop in official rates is exacerbated by the practice of multinational companies to delineate their profits in tax havens rather than declaring them where they operate.
Faced with this situation, in 2021, within the framework of the Organization for Economic Co-operation and Development (OECD), about 130 countries agreed on a 15% minimum level in corporate tax and required the 100 largest multinational companies to pay part of their profits in the countries in which they operate from 2024. The agreement, which included a veto on the implementation of new digital taxes, was born with many shortcomings for its implementation. It should be remembered that the Independent Commission for the Reform of International Corporate Taxes (ICRICT, for its English acronym) has requested a rate of at least 25%.
These days we have seen that 138 OECD countries reached a new agreement to set measures to implement the 15%, but at the same time they postponed their veto power on new digital taxes for another year, until 2025. The measure affects countries overwhelmed by the crisis such as Sri Lanka, which has also received pressure from the International Monetary Fund to abandon its plan to impose a tax on digital services worth $ 5 million.
The IMF’s action prompted a powerful letter to its chair, Kristalina Georgieva, signed by ICRICT co-chairs, economists Giati Ghosh and Joseph E. Stiglitz, and other prominent commission members such as Thomas Piketty, Gabriel Zuckman and Eva Joli. The letter notes that Sri Lanka, like Pakistan, Kenya and Nigeria, did not support the 2021 agreement, so it considers it “unacceptable” to force it to “give up its sovereign right to implement fiscal policy.” Even more troubling is that the International Center for the Protection of Intellectual Property Rights (ICRICT) notes that “the current outcome of the OECD tax negotiations is unlikely to generate significant or sustainable revenue for developing countries.” The lack of tax revenue affects all countries that have had to borrow to mitigate recent crises, like ours. The lack of corporate solidarity threatens the social stability of millions of people.
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