The OECD has proposals to close tax loopholes on international business. The concept is fine but the reasoning seems lacking. I will look at nations with lower resource levels to otherwise attract business investment.
Theoretically, a nation attracts business by having low or no tax as competitive advantage. In other words, a nation with limited reasons for businesses to invest within their jurisdiction could incentivize business to invest by having lower tax on profitable income. With this in mind, creating an equal tax within all nations as the solution to acquiring tax dollars for governments could be disadvantageous to some nations. A great example of this, inside of a nations borders, is the state of Delaware as part of the United States. This article, by Leslie Wayne – business, finance, and political reporter for the New York Times, shares a balanced (if not slightly opposing) view compared to my own; nonetheless the article carries the relevant information regarding Delaware as having taken a competitive advantage with regard to lower tax as a jurisdiction. An example of how the process functions in practice would be the state of Delaware compared to the rest of the United States; Delaware has lower tax on business compared to the other states and attracts many businesses to operate within. In doing so, the state has created a competitive advantage which in turn generally forces other states to keep low taxes on business as well. This competition may decrease tax dollars across the country but it also allows for lower costs that could be passed on to the consumer. This competitive advantage, as it implies, attracts a majority of businesses though it certainly does not have a 100% monopoly on business investments. I agree there are issues from this process and don’t disagree that equal taxation could be the solution. I am simply concerned about the effect on jurisdictions without other incentives for business investment. I believe that creating equal tax on business profitable income across all nations would do one major thing: Nations with high resources for businesses to utilize would attract more than nations with out these resources. Currently by offering a lower tax on profitable income those lower resourced nations could compete more equally.