New tax avoidance rules could hike consumer prices, cut investment and reduce wages, warns the boss of one of the world’s largest independent financial advisory organizations.
OECD announces rules to crackdown on corporation tax avoidance
The comments from Nigel Green, founder and CEO of deVere Group, come as the Organization for Economic Co-operation and Development (OECD) announce a series of measures that aim to crackdown on legal corporation tax avoidance.
The rules are published in a detailed report ahead of this week’s G20 meeting of finance leaders in Australia. Under one of the news rules, firms will be made to reveal where they generate profits and pay tax in order to highlight if they legally transfer profits to low tax jurisdictions.
Mr Green says: “Clearly, and quite understandably, governments are keen to boost their revenues. Whilst the OECD’s sweeping new rules and regulations will sound appealing to many individuals – and will be trumpeted by vote-hungry politicians – they could however unleash serious, wider, unintended consequences.
Tax burden shifts
“It must be remembered that corporations don’t pay the tax, people do. When corporation tax is increased, this burden is, typically, carried by investors through lower returns, workers through reduced wages, and/or consumers through higher prices.”
He continues: “By lowering levels of corporation tax, companies are more resourced to freely create jobs, invest, and lower consumer prices – and this, in turn, increases the tax base and the revenue collected could be higher.
“There will always be global jurisdictions that offer highly attractive, competitive, pro-business corporation tax rates. As such, governments who are serious about wanting to boost their own corporation tax revenues should be urged to become a more desirable location for businesses and investors, rather than signing up to introduce further rules that might ultimately prove ineffective and potentially damaging.”
About deVere Group
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of 70 offices across the world, more than 1,200 staff, over 80,000 clients and $10bn under advisement.