Bring multinational profits home, says report

The 2019 World Development draft report says changes in the nature of work have made it essential to rethink the social contract to reduce levels of inequality.

The main pillars of a new social contract involve an efficient tax policy and an investment in human capital.

The World Bank analysts say this would involve increased tobacco and carbon taxes, eliminating value-added tax exemptions and energy subsidies in some countries and making global companies pay their equal share of corporate taxes in every country.

The report specifically outs “superstar” companies — Alphabet, Amazon, Apple, Facebook — which rely on intangible assets, as examples of corporations that are not paying their fair share of taxes.

To remedy this, the World Bank says global corporate tax laws that were drafted in the pre-internet and pre-globalisation era need to be updated so that the companies can be taxed effectively. The report says current estimates are that the level of assets sheltered in tax havens amounts to about 8% of global gross domestic product, or about $200-billion.

“Recent estimates suggest that 45% of multinationals’ profits are shifted to tax havens, causing a loss of 12% of global corporate tax revenues,” it adds.

The new social contract would redress the balance by providing everyone with equal opportunities to acquire higher-order skills to compete in a highly automated environment.

“The most direct way to provide fairness is to support early childhood development. Guaranteeing every child access to adequate nutrition, health, education and protection in early years ensures that they have the required foundations for developing skills in the future.”

This involves cash transfers and supporting the first 1000 days of a child’s life in terms of nutrition, health and stimulation, as well as at least one year of preschool.