Ending Corporate Tax Avoidance and Tax Competition: A Plan to Collect the Tax Deficit of Multinationals

20 Pages Posted: 17 Aug 2020 Last revised: 23 Jan 2021

See all articles by Kimberly A. Clausing

Kimberly A. Clausing

UCLA School of Law

Emmanuel Saez

University of California, Berkeley

Gabriel Zucman

University of California, Berkeley - Department of Economics

Date Written: January 20, 2021

Abstract

Between 1985 and 2019, the global average statutory corporate tax rate has fallen from 49 percent to 23 percent, largely due to the rise of international tax competition. The biggest winners from globalization have received the largest tax cuts. In this paper we propose a solution to replace this race-to-the-bottom with a race-to-the-top. Multinational companies that have low effective tax rates in some foreign countries (what we call a “tax deficit”) would pay an extra tax in their home country. We explain how such a tax should be designed and how it could be collected. The ideal solution would be for all countries to jointly start collecting the tax deficit of their multinationals. We describe how defensive measures could be applied against countries refusing to take part in such an agreement, measures that could ultimately pave the way to global corporate tax coordination.

Suggested Citation

Clausing, Kimberly A. and Saez, Emmanuel and Zucman, Gabriel, Ending Corporate Tax Avoidance and Tax Competition: A Plan to Collect the Tax Deficit of Multinationals (January 20, 2021). UCLA School of Law, Law-Econ Research Paper No. 20-12, Available at SSRN: https://ssrn.com/abstract=3655850 or http://dx.doi.org/10.2139/ssrn.3655850

Emmanuel Saez

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Gabriel Zucman

University of California, Berkeley - Department of Economics ( email )

579 Evans Hall
Berkeley, CA 94709
United States

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