All posts by Ferghane Azihari

A lot of money on a white background. 3d illustration

There’s No Such Thing As Corporate Tax

The EU reaffirmed its commitment to fighting corporate tax avoidance through a statement by European Commissioner Pierre Moscovici. This should come as no surprise following recent financial scandals exposed through the Panama Papers and Luxleaks, and the ensuing international outrage towards corporations “not paying their fair share”. Yet, the push for higher corporate taxes disproportionately also affects ordinary citizens by increasing their tax burden.

Corporate tax avoidance is regularly said to be unfair to other taxpayers. Indeed, proponents of higher corporate taxes accuse multinational companies of de facto increasing ordinary citizens’ tax burden because these ones would be forced to compensate states’ budget shortfalls.

However, this artificial opposition between corporate and public interests is dishonest. When one argues corporations don’t pay taxes, the implication is that shareholders, workers and consumers are not taxed at all, which is completely untrue. All these people are taxed in various ways, including income tax and valued-added tax, among other costs imposed by national governments. The only purpose of this distinction is to push ordinary citizens to support higher corporate taxes without allowing them to realise they are the ones who are going to pay the bill.

In fact, a corporation is a legal fiction which aims to reduce transaction costs between physical stakeholders, which are shareholders, workers and consumers. Consequently, every fiscal cost imposed on corporations will necessarily be paid by these people. Therefore, as corporate taxes increase, shareholders’ dividends and workers’ salaries will decrease, while consumers will be forced to pay more for their purchases.

Read more at the The Daily Caller 


Free Trade Doesn’t Depend On Multilateralism

For the first time since the end of the Second World War, multilateral institutions are losing their influence regarding open trade.

The World Trade Organization (WTO) has gone into hibernation after the failure of the Doha Round, and the European Union (EU) — long regarded as a pro-trade force — is facing its own local protectionist pressures. The EU’s difficulties in ratifying the Comprehensive Economic and Trade Agreement (CETA) with Canada, and even Brussels’ recent attempt to restrict the free movement of labor to satisfy Western Europe’s protectionist claims against Eastern Europe, show how the EU trade agenda is challenged.

Moreover, in the United-States, the election of Donald Trump marks the beginning of a new protectionist era. Trump considers both the Trans-Pacific Partnership (TPP) and The Transatlantic Trade and Investment Partnership (TTIP) as contrary to America’s interests. He asked for a renegotiation of NAFTA and even mentioned the possibility of withdrawing from the WTO.

The recent nomination of Peter Navarro, an economist well-known for his hostility against China’s growing commercial influence, as head of the newly created National Trade Council confirms the will of the new administration to engage in a new “trade war” — reflecting the old mercantilist bias that views international trade as a zero-sum game.

Continue reading at FEE.