The current international economic and financial architecture “is inadequate and even obstructive”, argues Jayati1609. But there are “obvious strategies” to increase public resources across the world, she writes
is facing numerous extreme, interlinked challenges, including a climate emergency and growing economic inequalities between and within countries. Tackling these problems requires funds to flow in the right direction, towards reducing carbon emissions, supporting education, health and other essential services and overhauling global infrastructure. All of this will, in turn, require massive increases in public spending.
Currently multinationals avoid tax payments of at least $240bn per year, and probably more, because the current international taxation rules were developed a century ago, when there were fewer border-straddling companies and no digital ones. The rules allow multinationals to treat each national subsidiary as a separate “arm’s-length” entity for tax purposes, and to move profits to low- or no-tax jurisdictions .
The commitment to divide taxing rights between countries has been eroded even more. It will apply only to large multinationals whose profits exceed 10% of revenues. And only a quarter of the “residual” profits above the 10% floor would be available for reallocation across countries for tax purposes. This would deliver as little as $12bn-25bn in additional revenues, with a small fraction of that going to lower-income countries.
Similarly, wealth taxes can be levied nationally. Even modest taxes on extreme wealth, which has grown dramatically in recent years, can reduce financial inequality and provide more revenue. Most countries have taxes on property but do not levy them on other wealth. Financial assets account for a growing share of the wealth of the richest individuals and the revenue potential is significant.
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