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IMF Downgrade of Global Economy Must Not Drive 'Knee Jerk' Tax Changes

IMF Downgrade of Global Economy Must Not Drive 'Knee Jerk' Tax Changes
10 Oct 2012
76% of multinationals do not believe that economic turmoil can be resolved through tax

The IMF's warning of a "slow and bumpy" ride for the global economy, as the US and Europe fail to get to grips with the continuing crisis, is worrying news for multinationals around the world.

Not only do these companies continue to face the headwinds of suppressed demand in the US and Europe and the slowing growth of BRIC countries, they are also concerned about the very real threat of further instability in tax regimes across the world as jurisdictions clutch at the straws of greater tax income by increasing an ever broader range of taxes.

In a recent survey of multinational CFOs conducted by Taxand, 76% stated they do not believe that the economic turmoil can be fixed through tax policy. Yet, jurisdictions continue to drive away the very multinationals that will help fix their economies through increased taxes, such as those proposed by President Hollande in France and, perhaps just as damaging, the mixed messages being given out by the UK, where David Cameron has indicated that taxes may need to increase, whilst his Chancellor, George Osborne, drives down corporate tax rates and looks to curtail workers' rights to make the UK more competitive.

The IMF has floated the idea that we may be past the worst of the turmoil and that the measures taken could result in growth as early as next year for economies such as the UK. Politicians need to address the deficits, but they must not take their eye off the prize of rebuilding their economic growth and for that they need to be aware of multinationals' need for clear and stable tax regimes, not knee jerk, populist tax rises.

Frederic Donnedieu de Vabres, Chairman of Taxand, the world's largest independent global organisation of specialist tax advisors to multinational businesses.

Read all highlights from the Taxand Global Survey 2012

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