Inequality and Taxation of Multinational Corporate Groups

Ute Schmiel, Anna-Lena Scherer

Publikation: Working paperForskning


The present paper deals with the question how to tax multinational corporate groups in order to reduce inequality. Since inequality is abstract, it is necessary to interpret it, which implies referring to ethical concepts and theories. Ethical concepts argue that companies should generally be held responsible for paying their fair share of tax. They interpret tax avoidance as irresponsible behavior that results in inequality. However, these findings from an ethical perspective are at odds with the mainstream economic theory that understands firms as legal fictions. From this perspective, there is no reason to deem companies able to pay taxes. Rather, corporate taxes are the taxes of the shareholders the corporation has to pay for them. Insofar, there is only a legal responsibility of legal fictions to comply with these legal obligations. Yet, there is no reason to assign a legal responsibility to corporate groups since not the groups but the group companies are legal actors. All in all, according to this view, multinational corporate groups’ tax avoidance is not unethical and does not lead to inequality.

Yet, deeming companies legal fictions (and groups not even that) seems bold considering that many of them are in fact powerful actors and some of them are even more powerful than entities like countries. Deeming companies legal fictions also seems problematic considering the extent of corporate tax avoidance. Prevailing critical views of the economic mainstream theory that interpret corporations as entities do so either from a legal-philosophical, an ontological, or a social science perspective. However, they have not refuted the economic mainstream approach until now. The reason is, probably, that they do not refer to individual behavior hypotheses.

In contrast, the present paper bases its argumentation on the political-cultural market approach that explicitly uses microfoundations. We find that the political-cultural approach provides reasons to ascribe an ethical responsibility for paying a fair share of tax to multinational corporate groups. Thus, if groups do not pay their fair share of taxes, existing inequality will be intensified.
UdgiverCopenhagen Business School [wp]
Antal sider27
StatusUdgivet - 2020
Udgivet eksterntJa
NavnCBS LAW Research Paper


  • Inequality
  • Fair share of taxes
  • Political-cultural approach
  • Group taxation
  • International taxation