Chapter 10: Unravelling the relationship between tax policy and business: theory, evidence and facts
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This chapter offers an overview of literature and contemporary issues regarding tax policy and businesses. The emphasis is on how businesses, more specifically multinational corporations, influence tax policy. Beginning with the evolution of corporate taxation it then explores businesses’ reactions or adjustments to tax policy changes. Recent developments, such as tax scandals and the Organisation for Economic Co-operation and Development’s (OECD) ambitious BEPS project and the involvement of new actors in the tax policy field, such as tax activists, have challenged the power of business. Nevertheless, the arguments from business representatives about legality, certitude in the tax environment, low compliance costs, confidentiality and competitiveness are overarching contentions that continue to resonate well with governments that are concerned with attracting and stimulating investment. As it is the case in other fields, businesses possess structural, instrumental and discursive power, all of which influence tax policy decisions. To a certain extent, MNEs have the power to move headquarters or delocalize production, shift heaps of money and they have the financial resources to access the necessary expertise and participate in the policy process. Furthermore, they more recently developed a narrative to promote their good corporate tax behaviour. Future developments might lead business to adapt again and be creative as major international tax law changes could counterbalance their influence.

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