A critique of the Laffer theorem’s macro-narrative consequences for corporate tax avoidance from a Global Wealth Chain perspective

Abstract

ABSTRACT Global Wealth Chain analysis explores the potential for wealth creation to become wealth capture. Corporate tax avoidance is a component in many GWC. The problem is complex, involving both practices and undergirding macro-narratives that support a status quo and limit political and regulatory action. In this paper, I argue that the Laffer theorem and its legacy plays a background role in framing tax avoidance. The theorem is one component in a general direction of travel of neoliberal policy. Following general discussion of the issues I note that the original version of the theorem takes no account of avoidance and subsequent iterations do so based on incompatible concepts of firm behaviour. These problems are rooted in mainstream economic methodology and distort a more historical, sociological and institutional understanding of the economy. This has additional consequences for issues of tax justice, since these sit awkwardly with formal economic analysis.