More Corporate Tax Reform Ahead To Combat Global Tax-Dodging

Corporate taxes have traveled to the top of organizations’ biggest areas of focus in recent years, largely as a result of U.S. tax reform efforts and global regulatory initiatives to combat tax avoidance.

The latest data on corporate taxes in the U.S. brings new questions to the surface about the impact tax reform had on the business community. According to new analysis from Yahoo Finance, citing Internal Revenue Service (IRS) data, as well as a new report from Oxford Economics, corporations in the country are paying the lowest tax rates they have in decades, while refunds from the IRS have increased.

“There are a lot of breaks and loopholes that allow a company not to pay,” said Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy, according to Yahoo Finance reports Friday (May 31). “People, when they think of tax reform, think the government is going to fix the tax code and get rid of breaks and loopholes and get rid of tax dodging. What we got at the end of 2017 was not that. It was the opposite of that. The Tax Cuts and Jobs Act left a lot of special breaks and loopholes in place and created some new ones.”

The latest data from the IRS and Oxford Economics was published just days after separate analysis from Tax Justice Network, which pinpointed the U.K. and its territories as “the world’s greatest enabler” of corporate tax avoidance.

“The U.K., with its corporate tax haven network, is by far the world’s greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system,” the study stated.

Amid these new reports, the Organisation for Economic Cooperation and Development announced Friday a new initiative to collaborate with the Group of 20 economic powers (G20) to develop a roadmap for reforming international tax rules.

“There is now an international consensus recognizing that our tax rules are no longer adapted to the 21st century,” said Bruno Le Maire, France’s finance minister, in a statement, pointing to the challenge that digital corporations present when establishing themselves in low-tax markets yet selling to countries with higher tax rates.

Below, PYMNTS breaks out the latest data on corporate tax reform past and future.

$91 billion less in corporate taxes were paid in 2018, new data obtained from Yahoo Finance from the IRS revealed. The publication highlighted a new report from Oxford Economics revealed. Researchers found that organizations are paying their lowest tax rate since 1947 — just 7 percent — while some companies managed to pay $0. Reports said corporate tax payments in 2018 were the lowest they had been in nearly a decade, while IRS data also revealed higher refunds to corporates totaling $60 billion.

Four British territories are among the top 10 markets that “proliferate corporate tax avoidance,” according to the Tax Justice Network, with the British Virgin Islands, Bermuda, the Cayman Islands and the Bahamas all landing at the top of the pile. On average, the corporate tax rate of the top 10 companies that enable corporate tax avoidance is 0.54 percent, researchers found. The U.K. itself landed 13th on the list, with the report declaring that the U.K. accounts :for over a third of the world’s corporate tax avoidance risks.”

And 130 countries and territories have signed on to a new initiative led by the G20 to combat global corporate tax avoidance, according to reports. The OECD announced it will submit the initiative to G20 finance ministers next week to continue building support as organizations including Amazon, Facebook and Google heighten global tensions through their ability to lower tax payments. The biggest challenge, reports said, is that conglomerates are able to book their profits in low-tax countries, a rising issue as online companies proliferate. Reports said the OECD and the G20 are aiming to reform how countries can tax foreign companies, with a goal of having an outline for a global agreement by January 2020.