I wrote an article for Bloomberg a year ago suggesting what I called an Alternative Minimum Corporation Tax. In the context of the hint within the Trump corporate tax plan that such a tax might be under consideration for the USA I thought it worth sharing the blog I wrote on this issue again:
I have written an article under the above title for BNA Bloomberg. The aim of what I call an Alternative Minimum Corporation Tax is simple: it is to ensure that the profits of a multinational corporation are taxed at least once whilst respecting the right of each state to make its own choices on tax, none of which are violated by the proposal I make.
What is important are the advantages of such a tax. These I summarise as:
First, tax payment on profits is ensured.
Second, the objective of taxing profit once only is greatly assisted.
Third, profit shifting becomes a largely meaningless exercise.
Fourth, as a result most tax game playing will come to an end: in effect most tax haven usage will cease to be of benefit.
Fifth, certainty on taxation will increase: this is what business always says it wants.
Sixth, stakeholder confidence in business will grow.
Seventh, investor risk will fall, which is likely to improve share prices.
Eighth, the focus in business will be on the actual location of economic activity and not tax, which is likely to improve decision-making and so the rate of return on capital.
Ninth, tax administration, audit and dispute costs are likely to fall as any sums under dispute will be reduced.
Tenth, there will be a focus on improved tax and profit reporting as parallel tax books will cease to have as much relevance as they have in the past.
So is it a panacea? No, full unitary taxation based on much improved tax reporting that eliminates the anomalies of financial accounting when used for tax purposes in the accounts of multinational companies would be better than an AMCT. But for now, AMCT could pave the way to that outcome. I believe the time has come to give it serious consideration.
I am aware some will raise objection: this is however a serious proposal to solve an international problem threatening the credibility of world markets and the companies that operate in them. It is time that solutions such as this were given appropriate attention.
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The AMCT has always seemed to me such an eminently sensible approach. Is there any evidence that Labour are taking it seriously? Is there anything that can be done to make it more mainstream in Labour Party thinking? As you know I have written about it here: http://outsidethebubble.net/2016/10/20/fair-taxation-on-corporate-profits-3/.
I believe you, Richard, had a lot of involvement with the development of Labour Party policies in the past. Have you any thoughts about what might be done to package up this strategy so that more people understand and can engage with it? I think as a policy it’s a lot easier for people to get their minds round than, for example, a land tax which is also excellent but probably far too radical at present.
It is people like you we need to advise on how this can be made more widely understood and appreciated! What can the rest of us to?
Craig
This blog is my best attempt to make these things accessible. Well that and conference attendance as I have doing in the last couple of days
Beyond that I admit I am at my limits and so have nothing more to offer, not for lack of effort, but just for lack of time
Sorry…..
Richard