Early View Article - Paying a ‘Fair Share’: Multinational Corporations’ Perspectives on Taxation

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Global economic integration undermines the effectiveness of national corporate taxation regimes. Being able to shift their revenues to states where they pay little tax, multinational corporations (MNCs) legally minimise what they pay. However, corporations’ reputations are precious assets that they may jeopardise if they are widely perceived to not be paying their ‘fair share’ of taxation. Does this affect corporate perspectives? We first consider the reality that the global economy is both geographically and economically concentrated. This market and geographical concentration is the source of MNCs’ power and it affects their strategic perspective on minimising tax payments. It also supports a liberal preoccupation with shareholder value that reflects the institutional context of their major headquarters: the US. Second, we analyse indices of corporate reputation to demonstrate how this perspective dominates other attributes, particularly social responsibility. Third, we consider corporate responses to recent inquiries. We find that a liberal ideological belief in free markets and a focus on shareholder value dominate corporate conceptions of legitimacy. We therefore conclude it is unlikely MNCs will voluntarily pay their fair share of tax, but that in declaring their right not to do so they have opened the way to national and international re-regulation.

Policy Implications

  • Governments must take the lead in developing effective taxation regulations, rather than relying on self-regulation orworking with multinational corporations (MNCs) to address their tax minimisation strategies.
  • Because global corporate tax avoidance is not caused by market forces, but regulatory competition between states, theymust agree on international regulatory approaches to prevent this.
  • Because of the current political salience of the issue, there has never been a better time for states to create the multilat-eral rules necessary to re-regulate MNC’s tax obligations. They should do so as a matter of urgency.
  • As the major headquarters for MNCs, the US must take the lead in regulating them to pay their fair share of tax both athome and abroad.
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