Corporate taxes, tax avoidance and Covid 19

If there is one thing that the pandemic has made obvious to (almost) everyone it is the key roles played by government (federal, provincial and municipal) and by public services such as health care, research, street cleaning, water provision, leisure centres, parks, social housing, design of public areas, road maintenance, support for the unemployed, and so on.

Governments provide these services thanks to the taxes (almost) everyone pays. Some people do not pay taxes because they earn little or nothing: that is normal under a fair and progressive tax system, which taxes people on the marginal utility of their extra dollars. In other words, a fair taxation system recognises that one extra dollar in the pocket of, say, a struggling care worker who needs to pay her rent is worth a lot more than one extra dollar in the pocket of a CEO or shareholder of Amazon, Google, Netflix, or many others who pay little to no taxes – or indeed in the pocket of a university professor such as myself who does pax taxes (but still has decent after-tax income).

The Covid crisis shines renewed light upon the scandalous way in which the platform economy, but also the global financial sector and individuals capable of employing wealth management teams, avoid taxes. They sometimes avoid taxes legally (but then who lobbies the politicians who write these laws?), sometimes less so.

Cities, the health service, and all other public institutions upon which corporations rely to make money (after all, they rely on an educated workforce, healthy workers, transport infrastructure, the legal system, a sound regulatory framework, vaccines….) have been weakened by tax avoidance over the last decades. Governments, which took on massive debt to bail out the private financial system in 2008, are yet again taking on massive debt to see us through the Covid crisis, even as large platform-base corporations reap in more tax free money. It is time they not only paid up, but acknowledged that they depend upon society to make their money. It is probably too much to expect them to contribute willingly, as responsible corporate citizens, to general welfare (though some billionaires have called for higher taxes – and I’m happy they have done so).

Stronger global tax regulation and enforcement – which requires international cooperation – is the only way forward. In the meantime, our cities crumble, health workers are undepaid, logistics workers are exploited, and income taxes (which hit the middle classes) will need to rise, as will user fees and sales taxes – which hit the poorest the most hard -, to pay for the recovery.

Published by Richard Shearmur

I am a professor at McGill's School of Urban Planning. I perform research on innovation, on how we locate work activities (in a world where people often work from many places), and on urban and regional economic geography. I used to work in real-estate, and teach a course on this. I am an urban planner, member of the Ordre des Urbanistes du Québec and of the Canadian institute of Planners.

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