Yet, despite successful raids on the coffers of the banks, governments have had limited success in extracting more tax revenue from the wider corporate sector of the developed world.
public attitudes to tax in general are complex — witness the apparent lack of appetite for redistributive taxation to address inequality despite the fact that economists at the International Monetary Fund have found that redistribution and reduced inequality support faster and more durable growth.
Consider, first, the remarkable profitability of the global corporate sector. On the basis of data from 28,000 companies, a recent study by the McKinsey Global Institute shows corporate earnings before taxes and interest more than tripled from $2tn in 1980 to $7.2tn in 2013, rising from 7.6 per cent of world gross domestic product to almost 10 per cent. Importantly, corporate net earnings after taxes and interest rose even more sharply.
As well as the opening up of emerging markets, the boom in post-tax earnings reflects such factors as falls in borrowing costs and the price of labour, equipment and technology — and falling corporate tax rates.
falling tax rates reflect competition between states for internationally mobile investments. Yet corporate tax revenues are also under pressure because national tax laws have been left behind by the movement of global capital and the fact that corporate assets are increasingly intangible.
Multinationals thus structure their activities to exploit the gaps and mismatches in the system. Through the perfectly legal shifting of profits to low or no-tax locations, such companies undermine the fairness and integrity of tax systems around the world.
Economists at the OECD estimate the resulting annual losses incurred by governments at anywhere from 4 to 10 per cent of global corporate income tax revenues, or $100bn to $240bn annually. This is most conspicuously true of American multinationals, which keep more than $2tn of earnings abroad in order to avoid paying US tax.
no G20 government appears ready for more radical solutions, such as taxing corporate income at the jurisdiction where the sales occur, as with value added tax. Also, the money power that big business deploys via campaign finance and intensive lobbying saps political will for higher corporate taxes.
On the wider issue of inequality and redistribution, on both sides of the Atlantic the public appears to have accepted the post-Reagan, post-Thatcher orthodoxy that imposing higher taxes on the rich and increasing aid to the poor is bad for economic growth, notwithstanding the work of IMF economists referred to earlier.
There has also been a longer-term retreat from the belief that a just society requires its winners to provide a safety net to the less well-off. This emerges particularly strongly from the British Social Attitudes surveys, which chart a collapse in support for welfare spending from 65 per cent in 1991 to 31 per cent in 2010. There has been a 20 to 30-year decline in the preference for redistribution and a decline in trust in the ability of governments to use tax revenues efficiently.
Now evidence has emerged, in a recent Brookings Institution paper by William Gale, Melissa Kearney and Peter Orszag, that increasing the top marginal tax rates for those in the 95th percentile and upwards has only a trivial effect on overall income inequality.
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