Do not let multinationals wriggle out of paying their due share of tax

IN A REPORT titled Corporate Taxation in the Global Economy published on March 10, the International Monetary Fund suggests that multinational enterprises should pay more tax to low-income countries where they make huge profits from cheap labor and resources. Beijing Youth Daily comments:

Statistics show that the corporate tax paid by multinational enterprises as a proportion of their net profits has dropped constantly over the past 30 years. Once a driver of economic globalization the multinationals have become a cause of the widening development and income gaps between developed and developing countries.

On the one hand, the competition for foreign investments among developing countries has prompted countries to lower the tax requirements for foreign companies. On the other hand, the advancement of new information technology has made tax evasion and profit shifting easier for transnational companies.

According to the IMF, because of the profit shifting tactics of transnational companies, the non-OECD countries suffer a loss of about $200 billion in taxes every year, which contributes to the poverty and environmental degradation in these countries, affecting the realization of the 2030 sustainable development objectives set by the United Nations.

The tax evasion, which benefits the rich class in developed countries, has also harmed the interests of the middle class in developed economies, aggravating social splits and polarization.

Now the world is entering a 4.0 version of economic globalization, it is time to increase the tax on multinational enterprises.

The international community should promote global taxation collaboration and promote the development of the Forum on Tax Administration, which was created in 2002 by the OECD to improve taxpayer services and tax compliance, to minimize the impacts of the multinational companies' practices that lead to erosion of their tax base and profit shifting. More should be done to form a global prevention and control system on corporate tax evasion to prompt the companies to fulfill their duties for developing countries that become footholds in their expansion worldwide.

As a main recipient of foreign investment and a major international investor, China should take an active part in the reform of international corporate taxation to better safeguard developing countries' interests.