1 minute read

INTERNATIONAL CORPORATION TAX Alex Freshwater

INTERNATIONAL CORPORATION TAX

Corporation tax is tax levied on firms net income, this has frequently been avoided by multinational corporations (such as Apple). This tax is currently under debate as governments need more money to pay for record levels of public borrowing due to the coronavirus pandemic. Furthermore the avoidance of this tax has subsequently led to a reduction in government earnings, but also allowed MNCs to monopolise in their market; at the expense of small businesses.

This international corporation tax has two main aspects. The first aspect is that companies would get a right of taxation over a share of profits generated in their jurisdiction by overseas-headquartered multinational companies. The second aspect is that a minimum corporation tax rate would be imposed by countries on the overseas profits of large companies headquartered in their jurisdiction. This tax would only apply to MNCs with revenue above a certain threshold. The OECD have estimated that these taxes could bring in £57bn. However it is not certain this tax will be implemented as it is still under debate within the G7.

Small firms would be greatly affected by the implementation of the international corporation tax. Firstly, if MNCs have to pay more in tax, then they may have to increase prices. This price increase could lead to a fall in demand; this could cause smaller firms to see an increase in demand for their cheaper products, if they are substitutes.

Furthermore if MNCs become less profitable they will receive less investment (as investors have less incentive to invest), this could further level the playing field in many markets; allowing smaller enterprises to emerge in markets.

This article is from: