Corporate Tax Rates: How Low Can You Go
IMF Blog, July 15, 2019
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Bibliographic details
- Authors: The Editors
- Published: July 15, 2019
Summary
- Over the past 30 years, corporate tax rates in all countries have fallen to very low levels.
- The trend toward lower corporate tax rates, combined with profit-shifting by large multinational corporations, undermines tax revenue and public confidence in tax fairness.
- A fundamental rethink of international corporate taxation is urgent to address these problems and to protect the revenue base of low-income countries.
Problems identified
- Ease of tax avoidance by multinationals undermines both tax revenue and faith in the fairness of the overall tax system.
- The existing international corporate tax architecture is described as "fundamentally out of date."
- Advanced economies have historically shaped international corporate tax rules without sufficient consideration for their effects on low-income countries.
Impact on low-income and non-OECD countries
- The current situation is especially harmful to low-income countries, depriving them of revenue needed to:
- achieve higher economic growth,
- reduce poverty,
- meet the 2030 Sustainable Development Goals.
- IMF analysis shows non-OECD countries lose about $200 billion in revenue per year, or about 1.3 percent of GDP, due to companies shifting profits to low-tax locations.
IMF analysis and criteria for reform
- New IMF research analyzes options for reform in the context of three key criteria:
- better addressing profit-shifting and tax competition;
- overcoming the legal and administrative obstacles to reform;
- ensuring full recognition of the interests of emerging and developing countries.
- Large changes are now being considered; rethinking the existing system and addressing root causes could allow all countries, including low-income nations, to benefit.
Policy direction and cooperation
- Effective reform requires countries to work together.
- Progress needs cooperation among all countries toward a lasting, efficient, and fair approach that pays particular attention to the interests and special circumstances of developing countries.
About the blog entry
- Title: Corporate Tax Rates: How Low Can You Go
- Author: The Editors
- Date: July 15, 2019
- IMFBlog is a forum for views of IMF staff and officials; the IMF is an organization of 191 countries working to foster global monetary cooperation and financial stability.
- Views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.
IMF Blog — Corporate Tax Rates: How Low Can You Go; The Editors; July 15, 2019.
