Published: 23/06/2021

Every year, global CIT revenues are as much as USD 240 billion lower due to profit shifting to tax havens.

From digital tax to global CIT

The pandemic has accentuated the importance of digitalisation. Hardly any family or firm around the globe would have survived the past year without businesses such as Google, Apple, Facebook or Amazon. At the same time, transnational corporations have been known for their avoiding corporate income taxes. Profit shifting to tax havens is common practice. Having noted record-high sales of EUR 44 in the EU in 2020, Amazon reported a loss of EUR 1.2 billion, thus avoiding income tax.

‘The OECD has been addressing this issue. We seem to be quite near a global compromise on the matter. Firstly, arrangements are being made to tax transnational corporations’ profits where they are earned. Secondly, we are close to a consensus on a global minimum CIT rate (15 per cent) for the largest multinational companies’, says Łukasz Błoński, an analyst at the Strategy Team of the Polish Economic Institute.

Tax the rich

For several decades, income and wealth inequalities have been increasing. In 2019, the richest 10 per cent of the world’s population owned 85 per cent of all global wealth. In 2020 alone, the value of billionaires expanded by over USD 5 trillion to as much as USD 13 trillion. Tax systems find it challenging to keep up with such fast-growing assets. In recent years, national states have significantly reduced taxes on the richest individuals, with limited capacities to cope with a wide range of tax avoidance measures. The wealthiest transferred USD 7.6 trillion to offshore accounts to escape tax administrations.