Japan Press Weekly

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2013 July 24 - 30 [ECONOMY]

Multinational corporations bring about hollowing-out of tax revenues: economic scholar

Tax avoidance by and tax breaks for multinational corporations (MNCs) have caused the hollowing-out of tax revenues and led to fiscal crises, economic scholar Tomoyori Hidetaka pointed out in his commentary published in Akahata on July 24.

The following is excerpts from his commentary.

At the G8 Summit held in Northern Ireland in June, tax avoidance by multinational corporations and the wealthy with the use of tax havens was one of the key issues under discussion. This indicated that G8 nation leaders can no longer overlook the situation in which MNCs taking advantage of tactics to avoid paying taxes are hollowing out nations’ tax base.

In addition to corporate tax avoidance, excessive tax breaks by MNCs’ home government is another major factor in the hollowing-out of tax revenues.

With the power and influence of multinational corporations growing, governments competed to further reduce corporate taxes under the pretext that higher corporate taxes lower corporations’ competitiveness in the global market.

With corporate globalization, the British government was the first to have lowered its corporate tax rate. The corporate tax rate in Britain decreased from 50% in the early 1980s to the current 30%. The Japanese government used to levy 43.3% tax on corporate income in 1984, but it lowered the rate to 25.5% in 2012.

Nations which implemented the corporate tax cuts are now experiencing the further hollowing-out of tax revenues and facing massive fiscal deficits.

These governments carried out austerity measures which imposed increased burdens on the general public and workers as makeshift policies to cope with the critical fiscal situation they face. In order to resolve the crisis, it is necessary for these governments to adopt tax and fiscal policies which eliminate MNCs’corporate tax avoidance and favorable tax treatment for MNCs.