Recent decades have seen a downward convergence in corporate tax regimes as advanced, emerging and developing economies moved to grab a bigger slice of the global investment pie. Headline corporate tax rates have fallen by 20 percentage points since the early 1980s. Alongside lower average rates, special tax incentives aimed at capturing investment have emerged, further reducing the effective rates paid by transnational corporations.
In the aftermath of the 2007-08 global financial crisis, many countries were compelled to slash spending and raise revenue in order to rein in precipitous budget deficits. Even as tax revenues as a share of GDP in many economies have reached their highest levels in decades, the trend towards lower corporate tax rates has remained largely intact.
In the face of post-crisis austerity, however, public tolerance of corporate tax avoidance has dissipated, giving rise to political momentum behind increasing transparency and limiting the scope for businesses to minimise their tax bills. The OECD has led the charge in this respect, in close cooperation with the G20 as well as partner countries and emerging markets, through the coordination of efforts to reduce base erosion and profit shifting (BEPS). Parallel efforts have been undertaken by the EU, which also continues to work towards a common consolidated corporate tax base that would have profound implications for corporate tax regimes in the region, if implemented.
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