{ "title": "Taxing for a New Social Contract", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham", "canonical": "https://www.imf.org/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham", "overlayPath": "/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/index.md", "summary": "The pandemic has exposed the costs of tax injustice—now is the time to make it right", "sections": [ { "heading": "The four Rs of tax and the case for renewal", "content": "- The “four Rs of tax” are presented as central to fixing broken tax rules and rebuilding government accountability.\n- The four functions emphasized: revenue, redistribution, repricing of public goods and public “bads,” and representation.\n- Representation is highlighted as the most important R: “Paying tax is the glue in the social contract.”\n- Direct taxes (on income and profits) are identified as most important to strengthening political representation; indirect taxes (consumption) are less salient and thus weaker in fostering tax citizenship." }, { "heading": "Empowered by tax: effects and inequities", "content": "- Effective taxation:\n - provides revenue and redistribution for public services and infrastructure;\n - allows repricing of public goods and public “bads” (example: public health costs of tobacco consumption);\n - bolsters representation, enabling taxpayers to hold governments accountable.\n- Paradox: lower-income people and households are almost always the most heavily taxed as a share of their gross income, yet are actively disempowered.\n- Cause of regressivity:\n - the great majority of tax paid by lower-income households is in the form of indirect taxes;\n - consumption accounts for a greater share of income for these households, so consumption taxes fall more heavily on them.\n- Indirect taxes are less salient and therefore weaker in supporting accountability and the social contract.\n- Lower-income households disproportionately include people more likely to struggle for representation: headed by women; people living with disabilities; racialized and marginalized ethnolinguistic groups; LGBTIQ people.\n- People in these groups are more likely to be excluded from formal government systems and to miss out on public services and fiscal transfers while contributing disproportionately through indirect taxes.\n- When tax systems fail to deliver representation, they compound political and economic inequalities and weaken the social contract for the marginalized." }, { "heading": "National obstacles and international failures", "content": "- Domestic political incentives are misaligned: short-term popularity and electoral success encourage lower and less salient indirect taxes rather than medium- and long-term strengthening of the social contract via direct taxes.\n- The pandemic revealed both state capacity to act and deep inequalities in who benefited, creating public demand for universal public services and social security.\n- Extreme wealth inequalities intensified during the pandemic; these imply responsibility for meeting new tax obligations lies with the wealthy.\n- International tax rules limitations:\n - OECD’s latest proposals “still do not require the taxation of multinational companies where their economic activity takes place.”\n - They “still do not prevent the anonymous ownership of assets and income streams”—central to individual tax abuse, corruption, and illicit financial flows.\n- The Tax Justice Network’s “ABC of tax transparency”:\n - A: automatic exchange of financial information;\n - B: beneficial ownership transparency (public registers for companies, trusts, partnerships, other legal vehicles);\n - C: country-by-country reporting to ensure accountability for multinationals where business activity and declared profits differ.\n- Progress noted:\n - originally these ideas were dismissed, but “just 10 years later the Group of Eight confirmed support for automatic exchange arrangements and for country-by-country reporting” and the Group of Twenty adopted all three in principle.\n - Delivery remains patchy; OECD mechanisms for international exchange systematically exclude lower-income countries from cooperation benefits." }, { "heading": "Global inequalities and quantified losses", "content": "- International failures create stark inequality in the global distribution of taxing rights: lower-income countries are denied effective taxation of economic activity and wealth in their jurisdictions, with direct human consequences.\n- The State of Tax Justice 2021 estimates combined global revenue losses from cross-border tax abuse by people with undeclared offshore assets and of multinational companies amount to some $483 billion a year.\n - Framing: “some $483 billion a year—or enough to vaccinate everyone in the world three times over.”\n- Distribution of losses:\n - Greatest absolute losses are suffered by OECD member countries.\n - Greatest losses as a share of tax revenues or public health budgets are borne by lower-income countries—many former colonies—translating into forgone public services and human development, including many thousands of needless deaths.\n- Responsibility:\n - Some of the richest countries—OECD member states and their dependent territories—are responsible for the great majority of tax losses suffered by others.\n- Analytical metaphor: a Venn diagram of four overlapping circles—countries made wealthy by imperial conquest; countries with greatest historical responsibility for the climate crisis; countries benefiting most from unfair global taxing rights; countries that hoarded COVID-19 vaccines and IP. The overlap highlights recurring policy choices and the need to change underlying dynamics." }, { "heading": "Rethinking fiscal policy and policy measures", "content": "- Political space may exist, in the pandemic’s shadow, for significant tax policy changes to fight inequality.\n- Noted consensus across diverse groups (tax justice activists to the World Economic Forum’s Global Future Council on the New Agenda for Fiscal and Monetary Policy) on measures including:\n - wealth taxes (example: adopted by Argentina);\n - excess profit taxes on companies that collected huge unearned revenue during pandemic lockdowns (example cited: Amazon).\n- Global-level recommendations from the high-level UN Financial Accountability, Transparency and Integrity (FACTI) panel:\n - a UN tax convention to ensure consistent transparency and to create a globally inclusive intergovernmental body to set tax rules (long supported by the Group of 77);\n - adoption of the proposal for a Centre for Monitoring Taxing Rights to provide consistent data and analysis on tax abuse suffered by, and facilitated by, each country.\n- Policy imperative: combine new progressive tax policies with domestic and international transparency measures to strengthen the four Rs and enable renewal of the social contract at all levels of per capita income.\n- Without such measures, necessary responses to the pandemic and the climate crisis and the curtailing of unnecessary inequalities are unlikely.\n\nSource: Taxing for a New Social Contract — Alex Cobham, F&D Magazine, March 2022.\n\n---\n\n Content in this bundle\n\n- الضرائب والعقد الاجتماعي الجديد\n - الضرائب والعقد الاجتماعي الجديد (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - الضرائب والعقد الاجتماعي الجديد (PDF){rel=\"external\" type=\"application/pdf\"}\n- Taxing for a New Social Contract\n - Taxing for a New Social Contract (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Taxing for a New Social Contract (PDF){rel=\"external\" type=\"application/pdf\"}\n- La fiscalité en faveur d’un nouveau contrat social\n - La fiscalité en faveur d’un nouveau contrat social (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - La fiscalité en faveur d’un nouveau contrat social (PDF){rel=\"external\" type=\"application/pdf\"}\n- Налогообложение в целях нового общественного договора\n - Налогообложение в целях нового общественного договора (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Налогообложение в целях нового общественного договора (PDF){rel=\"external\" type=\"application/pdf\"}\n- Impuestos para un nuevo contrato social ● Finanzas y Desarrollo ● Marzo de 2022\n - Impuestos para un nuevo contrato social ● Finanzas y Desarrollo ● Marzo de 2022 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Impuestos para un nuevo contrato social ● Finanzas y Desarrollo ● Marzo de 2022 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 通过征税建立新的社会契约\n - 通过征税建立新的社会契约 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 通过征税建立新的社会契约 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/bundle-manifest.json)", "Authors: Alex Cobham", "Published: March 1, 2022", "The “four Rs of tax” are presented as central to fixing broken tax rules and rebuilding government accountability.", "The four functions emphasized: revenue, redistribution, repricing of public goods and public “bads,” and representation.", "Representation is highlighted as the most important R: “Paying tax is the glue in the social contract.”", "Direct taxes (on income and profits) are identified as most important to strengthening political representation; indirect taxes (consumption) are less salient and thus weaker in fostering tax citizenship.", "Effective taxation:", "Paradox: lower-income people and households are almost always the most heavily taxed as a share of their gross income, yet are actively disempowered.", "Cause of regressivity:", "Indirect taxes are less salient and therefore weaker in supporting accountability and the social contract.", "Lower-income households disproportionately include people more likely to struggle for representation: headed by women; people living with disabilities; racialized and marginalized ethnolinguistic groups; LGBTIQ people.", "People in these groups are more likely to be excluded from formal government systems and to miss out on public services and fiscal transfers while contributing disproportionately through indirect taxes.", "When tax systems fail to deliver representation, they compound political and economic inequalities and weaken the social contract for the marginalized.", "Domestic political incentives are misaligned: short-term popularity and electoral success encourage lower and less salient indirect taxes rather than medium- and long-term strengthening of the social contract via direct taxes.", "The pandemic revealed both state capacity to act and deep inequalities in who benefited, creating public demand for universal public services and social security.", "Extreme wealth inequalities intensified during the pandemic; these imply responsibility for meeting new tax obligations lies with the wealthy.", "International tax rules limitations:", "The Tax Justice Network’s “ABC of tax transparency”:", "Progress noted:", "International failures create stark inequality in the global distribution of taxing rights: lower-income countries are denied effective taxation of economic activity and wealth in their jurisdictions, with direct human consequences.", "The State of Tax Justice 2021 estimates combined global revenue losses from cross-border tax abuse by people with undeclared offshore assets and of multinational companies amount to some $483 billion a year.", "Distribution of losses:", "Responsibility:", "Analytical metaphor: a Venn diagram of four overlapping circles—countries made wealthy by imperial conquest; countries with greatest historical responsibility for the climate crisis; countries benefiting most from unfair global taxing rights; countries that hoarded COVID-19 vaccines and IP. The overlap highlights recurring policy choices and the need to change underlying dynamics.", "Political space may exist, in the pandemic’s shadow, for significant tax policy changes to fight inequality.", "Noted consensus across diverse groups (tax justice activists to the World Economic Forum’s Global Future Council on the New Agenda for Fiscal and Monetary Policy) on measures including:", "Global-level recommendations from the high-level UN Financial Accountability, Transparency and Integrity (FACTI) panel:", "Policy imperative: combine new progressive tax policies with domestic and international transparency measures to strengthen the four Rs and enable renewal of the social contract at all levels of per capita income.", "Without such measures, necessary responses to the pandemic and the climate crisis and the curtailing of unnecessary inequalities are unlikely.", "**الضرائب والعقد الاجتماعي الجديد**", "**Taxing for a New Social Contract**", "**La fiscalité en faveur d’un nouveau contrat social**", "**Налогообложение в целях нового общественного договора**", "**Impuestos para un nuevo contrato social ● Finanzas y Desarrollo ● Marzo de 2022**", "**通过征税建立新的社会契约**" ], "related": [ { "title": "الضرائب والعقد الاجتماعي الجديد", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/ar/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/ar/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/ar/cobham.pdf", "mime": "application/pdf" } }, { "title": "Taxing for a New Social Contract", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/cobham.pdf", "mime": "application/pdf" } }, { "title": "La fiscalité en faveur d’un nouveau contrat social", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/fr/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/fr/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/fr/cobham.pdf", "mime": "application/pdf" } }, { "title": "Налогообложение в целях нового общественного договора", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/ru/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/ru/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/ru/cobham.pdf", "mime": "application/pdf" } }, { "title": "Impuestos para un nuevo contrato social ● Finanzas y Desarrollo ● Marzo de 2022", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/sp/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/sp/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/sp/cobham.pdf", "mime": "application/pdf" } }, { "title": "通过征税建立新的社会契约", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2022/march/zh/cobham.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2022/march/zh/cobham.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2022/march/zh/cobham.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/index.md", "json": "/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/index.json", "bundleManifest": "/en/publications/fandd/issues/2022/03/taxing-for-a-new-social-contract-cobham/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T17:51:25.871Z" }