Whether in The Panama Papers where the use of fiscal paradises to avoid paying taxes was exposed, the reform efforts to disclose the beneficial owners behind companies, the narrative capture by corporations to avoid and reduce taxation, or the lobbying and electoral efforts of businesses to promote favorable legislation and politicians, tax issues are rife with corporate capture.

The deeper concerns, of course, are twofold. On one hand, how can a State adequately provide for social protection and welfare with reduced coffers? On the other, if working people pay their taxes, but rich people and corporations do not, this only exacerbates inequality. A study byOxfam Internationaland theLatin American Council of Social Sciences (CLACSO)addresses this duality. The inequality policies implemented in Latin America, for example, such as raising salaries, employment, wealth redistribution, education, and social protection, have proven their effectiveness, but the decision on their implementation occurs in spaces of power asymmetry where, “often, it is the elites, those actors who concentrate the power to influence the political process, that permeate the resulting policies.” This is known as State capture.

Another challenge resulting from the corporate capture of the State is tax arbitrage and avoidance, or “the practice of profiting from differences that arise from the ways various types of income, capital gains, and transactions are taxed. The complexity of many countries’ tax codes allows for individuals to seek out legal loopholes or restructure their transactions in such a way that they are able to pay the least amount of tax.” We need not look far to find examples: Apple, Google, Starbucks, HSBC, Barclays, Shell, Unilever, etc.

TheOrganisation for Economic Co-operation and Development(OECD) countries seek to preventbase erosion and profit shifting (BEPS) by multinational corporations through aTwo-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.However, negotiations are slow and implementation is uneven. A concomitant challenge is record-breaking windfall profits, particularly in the pharmaceutical, energy, and Big Tech sectors. Similarly, OECD countries seek to impose additional taxes on windfall profits, most notably in the European Union. However, arbitrage and avoidance strategies, as well as a stiff corporate lobby, hamper the desired effects of such a tax.

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