In a completely opposite take on President Obama’s Trans-Pacific and Transatlantic trade agreements (TPP and TTIP), which would provide multi-national corporations new powers that put them above even the authority of sovereign governments, IMF chief Christine Lagarde on Feb. 22 proposed a new international and global taxation system that would create a level playing field against companies that move around from place to place seeking to limit their tax liabilities.
Lagarde’s comments come at a time when domestic revenues for most economies are in massive decline, and domestically headquartered corporations facilitate keeping their money offshore, and in tax-friendly safe havens to evade having to pay their fair due when it comes to reporting profits. And a prime example of this type of tax evasion comes from the Apple corporation, who although is headquartered in Cuppertino, California, keeps over $150 billion of cash outside the U.S. to limit their tax liability for sales done in foreign countries.
Governments globally should take steps to adjust taxation systems to close loopholes allowing multinational corporations to avoid paying taxes in countries of their origin, International Monetary Fund (IMF) Managing Director Christine Lagarde said on Monday.
The IMF chief said taxation allows governments to mobilize their revenues. She noted, however, that the process can be undermined by “overly aggressive tax competition” among countries, and companies abusing the system of international taxation.
“We need a tax system in which ordinary citizens are convinced that multinational companies and wealthy individuals are contributing a fair share to the public purse, to the common good,” Lagarde stated at a conference in Abu Dhabi, the United Arab Emirates.
Wealthy individuals try to avoid taxes, Lagarde explained, and move assets to offshore locations. She argued that the automatic exchange of taxpayer information among governments could make it harder for businesses to follow the scheme. – Sputnik News
Since 2008, many news stories and even grass roots movements have magnified how multi-national corporations use friendlier tax laws in certain countries to store or hide money outside of their primary home of operations. The Occupy Wall Street movement was one of the first major protests to bring to light the outrage over how one percent of the population owns and controls over half of a nation’s, and even the world’s wealth. And infamous stories like Warren Buffett’s use of Canada to avoid taxes in his Burger King merger, and General Electric’s use of loopholes to not only avoid paying any taxes in 2010, but to also get the U.S. government to pay them a refund of $3.2 billion, have helped fuel the rise of politicians like Bernie Sanders who seeks to remove all tax exemptions for corporations, and for those provided to the extremely wealthy.
The biggest fear however of any internationally created tax system is that it removes sovereign power from nations and citizens and puts its enforcement and collection into the hands of un-elected bureaucrats. But as long as governments and politicians today can be bought off by corporations to ensure they remain elected in their public offices, the chances of IMF member states passing rules which would equalize sovereign tax structures to ensure these companies pay their fair share is a long shot at best, and perhaps even unlikely to even make it to the bargaining table.