The information provided by whistleblowers on offshore activities published by the International Consortium of Investigative Journalists (OffshoreLeaks, LuxLeaks, SwissLeaks and the Panama Papers) has alerted public opinion to the tax evasion industry that deprives countries of significant resources and deepens social inequalities. This tax injustice is further exacerbated by tax evasion, which primarily benefits transnational corporations and higher individual earners. To compensate for the decrease in revenue resulting from reduced corporate income taxes and top individual tax rates, governments have increased taxes on the middle classes and increased VAT, a tax borne by consumers, in other words, by the population as a whole. A similar trend took place in continental Europe – in France, for example, the top marginal tax rate decreased from 75 per cent to 41 per cent between 19.
In the United Kingdom, it was reduced from more than 90 per cent to 40 per cent under Margaret Thatcher’s government. In the United States, the Reagan administration lowered it from 70 per cent to 28 per cent before the Clinton administration increased it to 39 per cent. The top marginal rate on personal income tax fell by an average of 40 per cent in the OECD countries between 19.
At this rate, they will hit zero by 2052. Average global corporate tax rates decreased from more than 40 per cent to less than 25 per cent between 19. In the United States, the Trump administration implemented a tax reform in December 2017 that lowered the corporate tax rate from 35 to 21 per cent. For example, the average corporate tax rate in the Eurozone decreased from 35 to 22 per cent between 19. In order to attract investments, governments are in a race to outdo one another with the lowest possible tax rates. To compensate for this, governments have increased taxes on middle-income workers who are less mobile. The increased mobility of companies and higher income earners brought about by globalisation has led governments to offer increasingly favourable tax policies in order to attract them. While progressive tax policies can reduce inequalities, the social injustice that fuels the resentment felt by the losers of globalisation has been exacerbated by tax injustice.Īn empirical study of the evolution of tax policy in 65 industrialised and emerging countries between 19 published in the American Economic Review shows that globalisation has increased the tax burden on the middle classes and reduced taxation on higher incomes and corporate profits. The “losers of globalisation” who have been seduced by national-populist rhetoric tend not to be the poorest members of society, who often abstain from electoral participation, but are rather the middle classes living in small cities in deindustrialised regions, whose wages have increased less than the national average and who fear downward social mobility. The growing economic insecurity of the middle classes, which represent the majority of the working population – and therefore of voters – in industrialised countries, has encouraged the rise of national-populism and an assault on the foundations of liberal democracy. The losers are the middle classes of industrialised countries and the poorest populations of the least developed countries whose incomes have tended to stagnate.Īfter declining for several decades, social inequalities have risen again in the majority of industrialised countries following the neoliberal shift of the 1980s. As former World Bank Lead Economist Branko Milanovic has shown, the main winners of globalisation are the emerging middle classes of Asia, China in particular, and the world’s wealthiest people, who have benefited from a significant increase in earnings. By redistributing inequalities between and within countries, neoliberal globalisation has created winners and losers.
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