The counter-case: what the other side argues, stated fairly then weighed

A reference that only ever quotes one side is a pamphlet. If the case on this site is sound, it should survive contact with the best arguments against it, so here they are, stated as fairly and as strongly as their own advocates would put them, and then weighed. Two of the four arguments below turn out to be partly right. We say so. That is not a weakness in the case; it is what makes the rest of it credible.

The strongest objections to everything else on this site come in four forms, advanced by multinationals, business associations and serious economists. We take each in turn: the claim in its best form, then what the evidence actually shows.

Argument 1: "We follow the law"

The claim. Multinationals and their advisers argue, consistently and correctly, that they comply with the law in every country they operate in, pay every amount legally due, and that calling lawful tax planning "avoidance" is loaded and misleading. This was the substance of what the three multinationals summoned before the UK Public Accounts Committee in 2012 told it: that they complied with all applicable tax rules and paid all taxes lawfully required.

What the evidence shows. This is formally correct, and we say so throughout the site: almost all corporate tax avoidance is lawful. But "legal" is not the same as "matches where the economic activity happened" or "does what the law intended." The OECD's entire BEPS project was premised on the recognition that the legal framework itself contained gaps and mismatches that let profit disappear for tax purposes without anyone breaking a rule. The 2012 Public Accounts Committee made the same point in reverse: the failure lay in the law and in HMRC's inability to anticipate how it would be used, not in any breach. And the coffeehouse chain's voluntary £20 million payment in 2013, made under no legal obligation, was itself a tacit admission of a gap between what was legal and what was legitimately expected. The claim is true and it is also beside the point: the argument of this site is with the law, precisely because the conduct is legal.

Verdict: formally correct, and exactly why the target is the rules, not the filer.

Argument 2: "Tax competition is legitimate"

The claim. Free-market economists, including those associated with the Cato Institute, the American Enterprise Institute and the Adam Smith Institute, argue that competition between countries for mobile capital is healthy. It disciplines wasteful governments, holds down distortionary taxes, and attracts productive investment. This is not a fringe view; it has a serious academic basis in the standard tax-competition model (Zodrow and Mieszkowski), and it was influential at the OECD itself before the politics shifted.

What the evidence shows. The empirical record shows a sustained "race to the bottom." OECD average statutory corporate rates fell from about 28% to 23.1% over two decades, a pattern the IMF characterises as a classic coordination failure: each country cuts in response to others' cuts, and when everyone cuts, no one gains the intended edge and all lose revenue together. The World Bank notes developing countries are especially exposed, because they rely more heavily on corporate tax and have fewer alternative revenue sources. Pillar Two, the 15% floor, is in effect a formal admission by the institutions themselves that unconstrained competition produces net harm.

But there is a real and important nuance, and fairness requires stating it. The OECD itself distinguishes "harmful" tax competition (parking paper profit where there is no real activity) from legitimate competition on rates to attract genuine investment. Pillar Two preserves that distinction through its Substance-Based Income Exclusion, which carves out a return on real payroll and physical assets. The boundary between harmful and legitimate competition is genuinely contested in the academic literature, and it is not settled.

Verdict: partly correct. Competition for genuine investment is defensible; the race to the bottom on paper profit is the harm, and even the reformers concede the line between them is real.

Argument 3: "Corporate tax is inefficient and ends up paid by workers"

The claim. Many economists across the spectrum, Harberger and Feldstein among the classic names, argue that in an open economy capital is mobile and labour is not, so the burden of corporate tax falls largely on workers through lower wages rather than on shareholders. If that is right, taxing companies is both harmful (it deters investment) and regressive (it lands on workers). A well-known study of German regional business taxes found a wage elasticity of about -0.18 to the effective marginal tax rate, with the burden falling hardest on low-skilled workers, women and the young, and concluded that workers bear on the order of half of a corporate tax increase through lower wages.

What the evidence shows. This is one of the most contested questions in public finance, and the evidence is genuinely mixed, which we will not pretend away. But the incidence argument applies to increases in the rate in competitive open economies. It does not apply to the avoidance of tax through profit-shifting, which is what this site is about. A multinational that moves profit from the UK to Luxembourg does not thereby pay higher wages to UK workers; it simply reduces the UK Treasury's revenue. The wages-versus-shareholders question is about how high to set the rate. It is not a defence of paying near-zero through offshore structuring. The theoretical model also assumes competitive labour markets; in rent-rich sectors like big tech and pharma, more of the burden sits with shareholders. The Institute for Fiscal Studies has noted that some avoidance will persist even under Pillar Two, while still expecting the rules to cut economically distortionary profit-shifting substantially (we paraphrase the IFS position rather than quote it, having not pinned the exact wording).

Verdict: empirically mixed, and a legitimate constraint on how high rates should be. It is not an argument for zero effective tax via offshore structures, which is a transfer from the public purse to shareholders, not from shareholders to workers.

Argument 4: "The avoidance figures are overstated"

The claim. Business groups and some academics argue that the headline estimates, anywhere from US$100 billion to US$600 billion a year, rest on assumptions about "misaligned profit" that overstate the true loss. Differences in where profit is booked can reflect genuine business reality, such as where research happens or where a headquarters sits, rather than artificial shifting, and some studies do not fully account for the genuinely higher returns and unique risks multinationals carry in some places.

What the evidence shows. The methodology debate is real and substantive, and we engage it openly on by the numbers. The OECD's official estimate (US$100 to 240 billion) is well below the Tax Justice Network's (about US$348 billion for profit-shifting alone) and below the IMF-linked Crivelli estimate (around US$600 billion); the peer-reviewed Cobham-Jansky figure lands near US$500 billion. The aggregated country-by-country data underlying these estimates is not yet public at the individual-company level, which the Tax Justice Network itself acknowledges as a limitation. A reasonable conclusion is that the true figure lies somewhere between US$100 billion and US$500 billion, a range whose lower bound is already a first-order global policy problem. The OECD itself calls its US$100 to 240 billion range conservative.

Verdict: a methodologically valid concern about the precise number, and not a reason to dismiss the problem. Even the cautious lower bound is enormous.

The balanced assessment

Why we bothered to make the other side's case

Because the conclusion of this site survives it. Two of the four arguments are partly right, and conceding that openly is what separates a reference from a campaign. The "we follow the law" point is not a rebuttal of our case; it is our case, since the whole site targets the rules rather than the filer. The tax-competition and incidence arguments are real economics that constrain how the system should be reformed, not reasons to leave near-zero effective rates untouched. And the figures, even at their most cautious, describe a problem too large to wave away. Stated fairly, the counter-case sharpens the argument rather than dissolving it.

Key facts

• "We follow the law" is formally correct; almost all corporate tax avoidance is lawful, which is exactly why this site targets the rules, not the companies.
• "Tax competition is legitimate" is partly correct: defensible for genuine investment, harmful as a race to the bottom on paper profit; Pillar Two's Substance-Based Income Exclusion preserves the distinction.
• "Corporate tax falls on workers" is empirically mixed and applies to rate levels, not to profit-shifting, which transfers revenue from the public to shareholders.
• "The figures are overstated" is a valid concern about precision; estimates range from US$100bn (OECD, called conservative) to about US$500bn (peer-reviewed), and even the floor is a first-order problem.