CHAPTER 4
Taxing Corporate Income Roel Dom and Wilson Prichard
The Tax Compliance Challenge The challenges of taxing large corporate taxpayers, and especially multinationals, have attracted increasing attention over the last decade because many larger firms do not appear to be paying their fair share (ICRICT 2015; IMF 2021). This perception not only undermines revenue collection, but also may lead to unfair competition across firms and greater tax burdens on other taxpayers. Moreover, perceptions of unfair taxation of corporate actors may negatively affect the tax morale of other taxpayers and reduce their political support for broader tax reforms. The taxation of larger corporate taxpayers is of particular concern to lowand middle-income countries where revenue from corporate income taxes is almost as high, as a share of the gross domestic product (GDP), as in high- income countries. Because of their lower levels of revenue collection overall, however, in low- and middle-income countries corporate income taxes make up a significantly larger share of total revenue. Meanwhile, lower-income countries may be particularly vulnerable to international tax avoidance and evasion because of the challenges they face in enforcing international rules. Lower-income countries have also been most likely to experience revenue losses stemming from tax incentives and exemptions (Andersen, Kett, and von Uexkull 2018).
Taxing Corporate Income
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