Ten Reasons to Defend the Corporate Income Tax
Eurodad's partner Tax Justice Network has just published a report entitled Ten Reasons to Defend the Corporation Tax. This report outlines ten reasons why it is essential to defend the corporate income tax.
In summary, these are:
1. Corporate income taxes raise essential revenue for schools, hospitals and the rule of law.
2. Less well understood is the fact that the corporate tax helps hold the whole tax system together: without it, people will stash their money in zero-tax corporate structures and defer or even escape tax entirely.
3. The corporate income tax curbs inequality and protects democracy. The tax charge falls largely on the wealthy owners of capital: without it, corporations and their wealthy owners free-ride off the public services paid for by others.
4. Corporate taxes enhance national welfare. So-called “competitive” tax-cutting is fools’ gold, particularly for the larger economies.
5. Corporate tax cuts, incentives and loopholes ricochet around the world. A tax cut in one place may suck capital out of others and prompt
6. other jurisdictions to follow suit, in a race to the bottom where the only winners are the very wealthiest sections of society.
7. The corporate income tax is particularly important for developing countries, which rely more heavily on it than rich countries do.
8. Corporate taxes can rebalance economies. Corporations around the world are hoarding cash, not investing it. Corporate taxes harness this idle cash and put it to productive uses, via government spending on education, roads and other public services.
9. The corporate tax curbs rent-seeking. Because rent-seeking tends to be more profitable than genuine productive activity, the corporate tax falls more heavily on it.
10. Tax cuts and special incentives don’t stop at zero: they turn negative. In this race to below the bottom there is no limit on corporations’ zeal for free-riding off public goods and subsidies paid for provided by others.
11. Corporate taxes spur transparency and more accountable government. To collect the tax, states must put in place good tracking measures.
This document also addresses seven common myths about the tax: that it’s fine because tax avoidance ‘is legal;’ that taxes are ‘too high’; that tax is ‘theft’; that the corporate tax is unfair ‘double tax’; that it is inefficient and should be replaced by VAT; that corporate directors have a fiduciary duty to minimise tax; that the tax falls most heavily on ‘workers’; and that the Laffer Curve and so-called Dynamic Scoring are useful guides to policy.
In short, the corporate income tax is worth fighting for.
In short, the corporate income tax is worth fighting for.