One of the content problems with taxation in capitalist societies is the tendency of multinational and large corporations to evade tax to shift the burden onto individuals usually in the middle class. Over the past thirty years, the middle class has become increasingly stressed, and their tax burden has increased as large scale corporations, usually in the primary industries like mining and oil, pay almost no tax to speak of, and get government grants and tax concessions even as they make a massive profit. Trickle down economics is a failed experiment, and anyway, this is simply unfair, and a way to make the rich richer at the expense of society as a whole.
We used to have a concept of the “common wealth” or “common good” – infrastructure like roads, education, defence, the legal system and so on that support all the social and economic activities of the countries concerned. Since “globalisation” (that is to say, the latest incarnation of colonialism and exploitation of the poorer countries by the wealthy of the west), corporations have shifted their production and profits off-shore from most western countries, to the detriment of the communities of both the western nations and the exploited nations. So I wondered if there might be a way to redress this easily.
I therefore came up with this idea. I am sure someone else has also proposed it in better terms and detail, but I don’t know about them, so I thought I’d shoot off a short proposal.
First, let’s think of the infrastructural support from all corporations: things like transport systems, education (once upon a time, corporations used to do their own education of workers after a certain age, but now they have withdrawn from this and shifted that burden onto universities and state education systems, who are finding it harder to cope), health care, and so on. Let us suppose this is the shared wealth of the nation upon which they rely to do their business, a fair assumption to make. They should fairly be expected to contribute to this shared wealth. That they do not is the problem to solve.
One way might be to close loopholes in the tax law, but this will simply mean the corporations will either find new loopholes or buy new legislation to open new loopholes. A broad brush approach is needed. My proposal is this:
Set an infrastructure levy, say of about 5% of all gross trading (not profits, because they can be minimised). Given the auditing requirements in most nations this figure can be more or less accurately identified, as shareholders require it for the valuation of their shares.
Impose this upon all corporations that have a minimum trading amount, say $5 million per annum. So they must pay a 5% levy no matter what other tax they pay. If their tax burden exceeds this amount, then the 5% is subtracted from their tax burden. If they do not, then they pay the 5% levy in full. To make this even easier, allow corporations to not submit a tax return if they wish and their taxable income would be less than the levy, thus saving them a slew of accounting.
The result would be that all corporations would pay a minimum realistic amount. The levy could be raised or lowered according to the income needs for infrastructure. Governments could plan for social infrastructure works like public transport, freight transport, education and the like with some confidence. Tax evasion would become less important, and small businesses would not be hit with a major bill. The balance would shift away from individual taxation to those who benefit most by exploiting the resources of a country. And the motivation for exploiting foreign workers would drop, because there would be less profit to be gained by trading more cheaply.
It’s a thought…