In the November 2012 Taxcast: is it the beginning of the end of tax avoidance for multi-national corporations? Some countries fight back. And the Finance Curse – why an oversized finance sector’s bad for an economy. A special extended edition.
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The finance curse identifies a paradox at the heart of financial sectors. While it is common to think of a finance centre as the engine of an economy, an oversized financial centre can make a country poorer and destabilise economies, and actually delivers a range of harms. For instance, oversized finance boosts inequality, undermines democracy and people’s faith in the rule of law. It damages national security. It corrupts markets, makes businesses more fragile, less resistant to shocks, and harms good governance. It also has powerful geographical, racial and gender effects.
Tax evasion is an illegal – usually criminal – activity, by which a taxpayer escapes tax through deception. Tax avoidance, on the other hand, means getting around (or avoiding) the spirit of the law without actually breaking the law. There is a large grey area between the two poles of avoidance and evasion.
Revenue, to fund public services, infrastructure and administration.
Redistribution, to curb inequalities between individuals and between groups.
Repricing, to limit public “bads” such as tobacco consumption and carbon emissions.
Representation, to build healthier democratic processes, recognising that higher reliance of government. spending on tax revenues is strongly linked to higher quality of governance and political representation.
Reparation, to redress the historical legacies of empire and ecological damage.