Tax business

Readers' Views No 243, May 2004
OECD Observer

Letter to the editor: A shade over two years ago, you wrote in this magazine (Taxation in a global environment, OECD Observer No.230 January 2002) that the time was ripe for a new social compact between governments and citizens. You wrote that the former would provide services in an efficient and cost-effective manner, while the latter would pay their taxes. Aggressive tax planning “would be considered socially unacceptable”.

It’s a timely reminder as ministers gather for the OECD’s midterm summit later in May. They might not be aware, for example, that in April the United States General Accounting Office revealed that almost two thirds of American companies paid no tax between 1996 and 2000, despite the economy booming and profits hitting record levels.

As a result, US corporate tax receipts as a percentage of the overall tax base were at their second lowest ever in 2003, accounting for 7.4%, or US$132bn (£71bn) of federal receipts.

It is difficult to label this as anything other than aggressive tax planning, so much so that the actual rates of corporation tax being paid are beginning to be flagged up as a central measure of Corporate Social Responsibility (CSR). Previously, CSR was limited to mitigating the social and environmental risks incurred by high profile multinationals operating in the developing world. But in recent months, pressure groups and NGOs have started to recognise a financial dimension to CSR. The argument goes that the fair and transparent payment of tax is at the heart of the social contract between business and civil society.

The perceived injustice of corporations paying well below the effective tax rates in countries where they operate could reverberate louder and longer as a citizenship issue.

A recently established coalition, the global Tax Justice Network, believes this amounts to a hidden fault line running through the reputation of high profile multinationals. If so, it is conceivable that tax performance could become a source of operational risk, as critics of big business begin using CSR to leverage a boardroom response while demanding governments investigate revenue shortfalls.

That is not a comforting scenario for the publicity-shy multi-billion dollar tax-planning industry. Its work may be legal, but explaining away hundreds of millions in non-tax payments through the creative deployment of transfer pricing, avoidance vehicles and tax havens should, at the very least, make for an entertaining addition to company CSR statements.

—Marc Lopatin, London, marclopatin@onebox.com


©OECD Observer No 243, May 2004




Economic data

GDP growth: +0.6% Q2 2018 year-on-year
Consumer price inflation: 2.9% Sept 2018 annual
Trade: +2.7% exp, +3.0% imp, Q4 2017
Unemployment: 5.2% Sept 2018
Last update: 13 Nov 2018

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly


Online edition
Previous editions

Don't miss

  • Globalisation will continue and get stronger, and how to harness it is the great challenge, says OECD Secretary-General Gurría on Bloomberg TV. Watch the interview here.
  • OECD Secretary-General Angel Gurría with UN Secretary-General António Guterres at the 73rd Session of the UN General Assembly, in New York City.
  • The new OECD Observer Crossword, with Myles Mellor. Try it online!
  • Watch the webcast of the final press conference of the OECD annual ministerial meeting 2018.
  • Listen to the "Robots are coming for our jobs" episode of The Guardian's "Chips with Everything podcast", in which The Guardian’s economics editor, Larry Elliott, and Jeremy Wyatt, a professor of robotics and artificial intelligence at the University of Birmingham, and Jordan Erica Webber, freelance journalist, discuss the findings of the new OECD report "Automation, skills use and training". Listen here.
  • Do we really know the difference between right and wrong? Alison Taylor of BSR and Susan Hawley of Corruption Watch tell us why it matters to play by the rules. Watch the recording of our Facebook live interview here.
  • Has public decision-making been hijacked by a privileged few? Watch the recording of our Facebook live interview with Stav Shaffir, MK (Zionist Union) Chair of the Knesset Committee on Transparency here.
  • Can a nudge help us make more ethical decisions? Watch the recording of our Facebook live interview with Saugatto Datta, managing director at ideas42 here.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Rousseau
  • Do you trust your government? The OECD’s How's life 2017 report finds that only 38% of people in OECD countries trust their government. How can we improve our old "Social contract?" Read more.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2018