Blatant corporate tax avoidance has attracted the ire of politicians, citizens and consumers the world over in recent years. Since the financial crisis of 2008, international taxation has become a mainstream political issue championed by social justice campaigners and the progressive press the world over. Globally, governments and intergovernmental organisations have announced a range of reforms designed to ensure that MNCs pay their ‘fair share’ of tax, while some of the world’s most powerful and profitable firms have been subjected to multibillion-dollar fines.
Ainsley Elbra and Richard Eccleston
Since the Financial Crisis of 2008, there has been unprecedented interest in, and political momentum behind, reform of the international corporate tax regime. This chapter outlines the origins and subsequent failings of the international corporate tax regime and identifies the factors that, criticism notwithstanding, have made it resistant to change since its origins in the 1920s. The chapter traces the critical periods in the development of the international tax regime as it currently stands, highlighting both victories and setbacks. The analysis presented highlights the difficulties of achieving meaningful reform in collective action problems, such as international taxation, that rely upon high-level international cooperation. The recent BEPS initiative is examined (and discussed further in Chapter 2), and presented as a reminder of the pervasiveness of the obstacles to reform identified elsewhere in this chapter, and in the rest of this book. While recent reforms have showed some promising signs, history suggests that prophecies of thoroughgoing change should be treated with caution.
Awareness of tax avoidance by multinational corporations (MNCs) has been growing for some years, but the political and economic legacies of the financial crisis have combined to create a potent new politics of tax justice. This chapter discusses these developments, analysing the factors which have shaped the contemporary international tax agenda and tracing their impacts through a series of international legal frameworks and unilateral national policy interventions. Particular attention is paid to the OECD BEPS suite of initiatives, especially with regard to the options for reforming the way in which corporate profits and tax liabilities are divided between the jurisdictions in which economic activity is created. It is argued that the multitude of recent policy responses to tax avoidance are noteworthy owing to having been prompted, influenced and complemented by new advocacy campaigns and strategies developed and prosecuted by civil society organisations. Whether civil society groups can exert sufficient influence to ensure that MNCs pay their fair share of taxation remains to be seen, but the battle is shaping up to be a critical test of whether MNCs can be subject to an adequate level of democratic accountability.
The ongoing effects of the Financial Crisis (FC) of 2008–09 have led to widespread debate about the fairness of the global capitalist system. One important arena in which this debate has been played out is global corporate taxation, where a new politics of corporate taxation has emerged. This chapter, which discusses transnational activist networks, tax justice NGOs, and governments, explores the roles of these actors in raising the salience of corporate tax avoidance in the minds of ordinary voters and politicians alike. It is argued here that, prior to the FC, the most significant sources of non-governmental influence over global tax regulation were tax practitioners and business actors. After the FC, however, the politics and discourses of austerity and the budgetary challenges faced by governments opened the field of multinational corporate tax regulation to a much wider range of actors, and piqued public awareness and resentment of corporate tax avoidance. Tying these findings together, this chapter describes the new politics of corporate taxation and argues that it has created the potential for new forms of governance in this arena, including voluntary and private governance – possibilities explored elsewhere in this volume.
Leonard Seabrooke and Duncan Wigan
This chapter draws on insights gained from participant observation and elite interviews with activists, policy makers, private sector practitioners and other non-specialist non-governmental organisation professionals to describe the role played by the Tax Justice Network (TJN) in raising the salience of tax issues on the political agenda. In so doing, the chapter specifies the peculiar constellation of actor attributes, organisational forms and organising that can help explain issue adoption, policy influence and accelerated policy innovation in what has until recently been a technical policy domain largely impervious to civil society activism. This aim is advanced by developing frameworks to describe the role of NGO activity in global wealth chains (GWCs) focusing on economic justice issues. We find that, owing to the fast-changing, technically complex and cross-disciplinary nature of the tax policy arena, the effectiveness of larger NGOs may be muted by burdensome bureaucratic procedures. Rather, our analysis of the Tax Justice Network suggests that, in this context, smaller NGOs may pack a bigger punch.
This chapter discusses the prospects of certification schemes for tax, such as the Fair Tax Mark (FTM). It begins with a reflection on some important features and problems of tax policy, which informs a subsequent analysis of the nature and limits of certification schemes more generally. The analysis presented here suggests that we should not be too sanguine about the prospects of FTM (or any other tax certification schemes), and that such issues ought to be addressed by nation-states and international instruments. However, it has been questionable whether sufficient political support exists in some domestic jurisdictions, particularly in Switzerland and the European Union (especially Ireland, Luxembourg and the Netherlands), to address the issues at stake. The chapter concludes that the characteristics of the tax policy problems examined do not make them amenable to action through private governance regimes.
This chapter analyses publications, reports and public testimony from large accounting firms, examining how the so-called ‘Big Four’ firms (Ernst & Young, Deloitte, KPMG and PricewaterhouseCoopers) have responded to recent developments in tax policy requiring greater financial and tax transparency and an emphasis on fairness in the tax practices of their clients. First, the chapter provides an overview of how tax specialists’ monopoly of expertise in tax policy has evolved over many years. Second, it explains and justifies the focus on large accounting firms, emphasizing their central role in the tax field, their relatively homogeneous tax practices, and their influence in the development of tax policy. Third, the chapter describes three interrelated developments that have thrown the spotlight on to the tax planning industry and increased the pressure on large accounting firms. These developments are the collapse of Enron, the growing momentum of country-by-country reporting (CbCR), and tax activism. Finally, it discusses Big Four accounting firms’ assessments of tax planning from a legalistic perspective, highlighting the resulting challenge of reconciling arguments of tax morality versus tax legality.
John Mikler and Ainsley Elbra
Multinational corporations (MNCs) can legally minimise the tax they pay by shifting their profits to states where they do not actually earn them. They can do this because their economic power puts them in a strong position to make choices about where and how much tax they pay, without necessarily shifting their operations. However, what is possible, and legal, is not necessarily desirable from a reputational point of view. If corporations understand that their reputations are precious assets that they may jeopardise if they are widely perceived not to be paying their ‘fair share’ of taxation, this may affect their perspectives on aggressive tax minimisation strategies. After establishing the market and geographical concentration of MNCs, and demonstrating why it supports a liberal preoccupation with shareholder value rather than voluntarily paying more tax, in this chapter we analyse indices of corporate reputation to demonstrate how financial indicators outweigh social responsibility as indicators of corporate performance. We also consider Apple and Google’s responses to recent inquiries. These indicate that a liberal ideological belief in free markets, a focus on shareholder value, and adhering to legal requirements dominate corporate leaders’ conceptions of MNCs’ legitimacy. We therefore conclude it is unlikely MNCs will voluntarily pay their fair share of tax, but that in declaring their right not to do so they have undermined their legitimacy and left national and international regulation that forces them to do so as the logical alternative.
Tony Porter and Karsten Ronit
This chapter argues that civil society actors have played a crucial role in campaigning for more socially just tax policies. It establishes a framework for conceptualizing the contributions made by business and civil society actors to global tax governance, and discusses the considerable potential for increasing the role played by business in preventing tax evasion and aggressive tax avoidance. However, this will only be possible if public authorities alter the incentives for business actors to do this. Whereas the contribution of non-state actors to agenda setting in global politics is well understood, this chapter argues that business also has a key role to play in the implementation and enforcement of international tax measures, and scholars should pay closer attention to the relationship between public policy, business self-regulation and civil society advocacy and its importance for more effective and just tax governance globally. The chapter examines potential roles played by civil society and business actors at each stage of the policy process, starting with the role of self-regulation in general, and then considers each more specifically with regard to taxation at the global level. The main finding is that self-regulation is likely to occur in response to initiatives taken by public authorities, although there are some examples, such as the development of CbC reporting, where new policies have been developed by civil society actors before being adopted and implemented by public authorities.
James Van Alstine and Laura Smith
This chapter outlines the evolution of transparency in resource governance, focusing particularly on the Extractive Industries Transparency Initiative (EITI) and its unique form of voluntary governance. We discuss how the EITI has provided the space for private forms of authority to influence public and private sector tax governance, especially within the areas of changing regulatory/fiscal regimes, country-by-country reporting and beneficial ownership registers. Starting with the context of pressing governance issues such as the political-institutional challenge of the resource curse in developing countries, this chapter provides an overview of the development of the EITI, its functions and its design, and also offers some critiques. This analysis underpins an argument about EITI’s role as a precedent in broader regulatory and governance regimes targeting corporate social responsibility and tax avoidance issues both in the extractives sector and beyond.