World Economy Essay

World Economy Essay-85
Because of tax avoidance, national governments do not generate the revenues needed to pay for public services and welfare systems - both of which can have a progressive effect on the final distribution of income.

Because of tax avoidance, national governments do not generate the revenues needed to pay for public services and welfare systems - both of which can have a progressive effect on the final distribution of income.

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One way globalisation can increase inequality is through the effects of increasing specialisation and trade.

A rise in trade-to-GDP ratios signifies an increase in the volume and value of trade between countries and regions.

Multinationals matter - they generate 10 percent of the world’s annual GDP and more than 50 percent of the value of world trade.

One of the hot political and economic issues of the age has been the ability of businesses operating in more than one country (a transitional company) to use shadow pricing and other forms of legal tax avoidance to reduce their liability to pay tax and thereby increase the return to those with an equity stake.

Much depends on whether a government has sufficient resources and political will to implement an active regional and industrial policy to improve employment prospects for those negatively affected by globalisation.

Globalisation might also increase inequality because it usually leads to higher profits for multinational corporations such as Apple, Google and Facebook which feed into generous pay-outs for senior executives and increasing dividends for shareholders.

This can range from introducing country-by-country financial reporting so that it becomes clearer where the profits are being made, to introducing restrictions on interest rates charges from one subsidiary of a TNC to another.

There are also moves to reduce the amount of intra-company loans made by TNCs which can shift profits to countries with lower corporation tax.

Oxfam estimates that tax avoidance costs developing countries 0 billion a year whereas 0 billion could provide an education for 124 million children and pay for healthcare services that could prevent the deaths of at least six million children annually.

In evaluation, there are steps that governments can take to increase their tax take.

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