Paying a ‘Fair Share’: Multinational Corporations’ Perspectives on Taxation
| Author | Ainsley Elbra,John Mikler |
| DOI | http://doi.org/10.1111/1758-5899.12379 |
| Published date | 01 May 2017 |
| Date | 01 May 2017 |
Paying a ‘Fair Share’: Multinational
Corporations’Perspectives on Taxation
Ainsley Elbra and John Mikler
The University of Sydney
Abstract
Global economic integration undermines the effectiveness of national corporate taxation regimes. Being able to shift their rev-
enues to states where they pay little tax, multinational corporations (MNCs) legally minimise what they pay. However, corpora-
tions’reputations are precious assets that they may jeopardise if they are widely perceived to not be paying their ‘fair share’
of taxation. Does this affect corporate perspectives? We first consider the reality that the global economy is both geographi-
cally and economically concentrated. This market and geographical concentration is the source of MNCs’power and it affects
their strategic perspective on minimising tax payments. It also supports a liberal preoccupation with shareholder value that
reflects the institutional context of their major headquarters: the US. Second, we analyse indices of corporate reputation to
demonstrate how this perspective dominates other attributes, particularly social responsibility. Third, we consider corporate
responses to recent inquiries. We find that a liberal ideological belief in free markets and a focus on shareholder value domi-
nate corporate conceptions of legitimacy. We therefore conclude it is unlikely MNCs will voluntarily pay their fair share of tax,
but that in declaring their right not to do so they have opened the way to national and international re-regulation.
Policy Implications
•Governments must take the lead in developing effective taxation regulations, rather than relying on self-regulation or
working with multinational corporations (MNCs) to address their tax minimisation strategies.
•Because global corporate tax avoidance is not caused by market forces, but regulatory competition between states, they
must agree on international regulatory approaches to prevent this.
•Because of the current political salience of the issue, there has never been a better time for states to create the multilat-
eral rules necessary to re-regulate MNC’s tax obligations. They should do so as a matter of urgency.
•As the major headquarters for MNCs, the US must take the lead in regulating them to pay their fair share of tax both at
home and abroad.
Multinational corporations’weakened legitimacy
Governments the world over continue to face budgetary
challenges arising from the 2008 financial crisis. In the con-
text of a sluggish economic recovery and often unsustain-
able levels of debt, governments seeking to achieve fiscal
consolidation continue to look for ways to increase revenues
while implementing harsh austerity measures. The drive for
increased government revenue has drawn significant atten-
tion to the challenge of taxing multinational corporations
(MNCs). By operating across multiple jurisdictions, they are
able to take advantage of international arbitrage opportuni-
ties to reduce or eliminate their taxation obligations in the
states where they earn much of their revenue. These are the
same states whose governments are struggling to return
budgets to surplus in the post-crisis era. The US Congres-
sional Research Service finds that it is likely that the revenue
losses from tax avoidance by US-based firms alone are $100
billion per year (Gravelle, 2015). Global annual revenue
losses are estimated to be up to US$240 billion (OECD,
2015).
The ability of MNCs to avoid paying their ‘fair share’of
tax, combined with austerity measures being endured by
citizens, has led to campaigns waged by tax justice activists,
international non-government organisations and the media.
These campaigns have been enhanced by numerous tax
avoidance scandals, most recently the release of the
‘Panama Papers’which included an unprecedented 11.5 mil-
lion files providing evidence of the use of complex tax
avoidance schemes by some of the world’s most high pro-
file individuals (Harding, 2016). Although this most recent
scandal is largely focused on high net worth individuals, the
campaign being waged by civil society and the media
against tax avoidance has been at least equally as critical of
the actions of MNCs. Ultimately, it has painted MNC tax
avoidance as a failure of democratic governance, an issue
that reflects a growing dissatisfaction with the distribution
of power and wealth in society (e.g. see Oxfam, 2016).
The result is that while the bailouts and fiscal stimulus
measures the 2008 financial crisis necessitated seemed to
presage the end of neoliberal globalisation, eight years later
they appear to have been more in the nature of temporary
Global Policy (2017) 8:2 doi: 10.1111/1758-5899.12379 ©2016 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Issue 2 . May 2017 181
Research Article
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