Introduction

For too long, corporate lobbyists have claimed that corporate tax cuts create jobs - and that tax rises will kill jobs. This tired argument has been to justify cuts for big business while working people shoulder an increasing share of the tax burden. Union leaders and tax justice campaigners have long suspected this claim to be untrue. Now we have the data to prove it.

In the first global study of its kind, this research found no correlation between higher taxes and lower employment. In fact, the opposite appears to be true: that countries with robust corporate tax systems tend to have stronger labour markets, better wages, and more stable employment.

Led by economist Agustina Gallardo, the study was conducted in close coordination with trade unionists, bringing direct insight into the world of work. These findings challenge the long-standing claims of corporate lobbyists and provide critical evidence for tax justice advocates.

This brief provides a summary of this global study, giving union leaders the evidence and arguments needed to challenge corporate lobbyists. It demonstrates how to create a robust tax system that supports quality employment and reduces inequality. Curbing tax avoidance incentivises corporations that seek to minimise their corporate tax liabilities to invest in jobs and productive capacities. For the state, taxing profits where they are effectively realised—rather than where shareholders choose to declare them—translates into additional public resources. These resources can be used to enhance social welfare, fund public investment to create decent jobs, and ultimately accelerate the transition to a greener economy.

The implications are clear: we need to end the race to the bottom in corporate taxation.  The study demonstrates how tax avoidance and competition among states negatively impacts investment, wage growth, job creation and quality employment. The report proposes higher effective corporate tax rates, unitary taxation, and public country-by-country reporting as essential reforms to promote economic justice and improve employment conditions.

For union leaders and activists on the front lines of fighting for tax justice, this research validates what has been long argued - that cutting corporate taxes and turning a blind eye to avoidance creates real harms for workers and our communities. Not only does it defund the public services we all rely on - but also supresses wages, undermines bargaining, fuels inequality and increases the share of tax burden for workers.

Context: corporate profit shifting and shrinking tax contributions

Rethinking corporate taxes and job creation

Higher corporate tax revenues are a cornerstone of better-resourced essential public services and infrastructure. They provide governments with the means to invest in public goods like healthcare and education. Corporate taxes play a key role in addressing economic inequalities. When corporate tax rates are set too low, wealthy individuals can shift their income to corporations, allowing them to avoid higher personal income taxes and reduce their overall tax obligations.

There are however those who argue that higher corporate taxes reduce investment and the number of jobs created, resulting in less growth and resources available for public services. Meanwhile it’s often claimed that MNEs will be incentivised to move operations to lower-tax jurisdictions, divest their capital and leave many unemployed.

Yet studies show that factors other than tax are much more vital to investment decisions, including an educated workforce, strong public infrastructure and stable governance. Research by the International Monetary Fund (IMF) demonstrates how public investment, fuelled by tax revenue, “raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment.”

Even leading investors say tax rates aren’t what’s driving decision making, with Warren Buffett stating “I have worked with investors for 60 years and I have yet to see anyone shy away from a sensible investment because of the tax rate on the potential gain."

The reality is multinationals rarely move entire factories or production networks to offshore tax havens. Instead, many corporations use book-keeping tricks to artificially shift profits to offshore shell companies.  This activity creates few jobs and provides little to no benefit to the local population.

The global corporate tax “race to the bottom”, as well as a lack of robust international enforcement mechanisms, means that such profit shifting is a persistent issue which is far from being solved by the OECD’s BEPS or 15% Global Minimum Tax proposals.

But while corporations argue that higher taxes push them to relocate jobs, the reality is that many are growing wealthier while contributing proportionally less in tax.

Corporations are getting wealthier and paying less tax

Corporate profits have grown significantly faster than wages over the past two decades. IMF research finds that unit profits and markups have increased at a much higher rate than worker incomes, meaning corporations are capturing a larger share of economic gains while wages stagnate.

Many corporate leaders will make the truthful claim that their firms are paying more taxes than ever. But this research finds that statutory corporate tax rates have steadily declined across all income groups over the last 20 years.

As corporate profitability expands, corporations are paying proportionally less tax, benefiting from lower rates and incentives that reduce their overall contributions. While absolute tax payments may have risen with increasing profits, the overall share of tax revenue coming from corporations has declined, shifting the burden of financing public services onto workers. Without measures to align corporate taxation with rising profitability, this disparity will only deepen.

Key research findings

1. Higher tax revenue is linked to growth in formal employment

The data reveals a compelling trend: economies with stable and higher tax revenues often report better outcomes in formal employment. High-income countries, in particular, show a strong link between consistent tax revenue and elevated levels of formal employment. These revenues enable governments to invest in critical infrastructure, labour enforcement mechanisms, and public services that create an enabling environment for job formalisation.

Figure 1. Formal employment and total tax revenue as a % of GDP (2013-2021)

Source 1. Author’s elaboration based on ILO Stat and OECD Tax Database.

The graph shows that countries with higher tax revenues tend to have stronger levels of formal employment. This pattern is most evident in high-income countries (blue dots. In lower-income countries (green and yellow dots), weaker tax revenues often coincide with lower levels of formal employment, reflecting the challenges these economies face in building fiscal capacity to support job formalisation.

In contrast, emerging economies demonstrate a more complex picture. While some economies have seen an upward trajectory in tax revenues and formal employment, others show greater variability, reflecting challenges in tax enforcement and broader economic instability. Nevertheless, in countries where revenue is stable, formal employment trends tend to improve over time, reinforcing the importance of robust fiscal policies.

Lower-income economies with weaker tax revenues, however, face significant barriers. With limited tax capacity, their governments rely heavily on regressive taxes like VAT, which constrain public investment in formal job creation. The low and inconsistent revenue levels in these economies leave them struggling to build the fiscal capacity needed to support formalisation, exacerbating inequality and labour market informality.

This evidence challenges the long-held notion that lowering taxes on corporations automatically drives investment and job growth. Instead, it suggests that stable and robust tax revenues, supported by well-functioning tax systems, are the cornerstone of economic progress and labour market formalisation.

2. Higher corporate taxes reduce income inequalities

The study demonstrates a consistent pattern linking higher corporate tax rates with a fairer wage and income distribution. Analysing countries across income groups and over the last 8 years, it shows that when countries maintain higher tax rates, a larger share of national income is consistently allocated to workers through wages. The labour income share shows how much economic output goes to workers' wages compared to capital owners' profits and rents.

Corporate taxation can help income distribution between capital and labour, ensuring that workers benefit proportionately from economic growth. Countries with higher corporate tax rates tend to see those living off their wages (as opposed to capital owners) receive a larger share of national income, contributing to a more balanced distribution of economic gains. Therefore, higher corporate tax rates play a critical role in reducing income inequalities and promoting equitable economic growth.

Figure 1. Tax revenue and labour income share (2013-2021)

Source 2. Author’s elaboration based on ILO Stat and OECD Tax Database.

The graph shows that countries with stronger tax systems — particularly high-income nations (blue dots) — tend to allocate a larger share of national income to wages. This reflects how effective corporate taxation can help ensure economic growth translates into better outcomes for workers. In contrast, lower-income countries (green and yellow dots) often struggle to achieve similar wage gains, highlighting the role of limited fiscal capacity in reinforcing inequality.

3. Lower corporate taxes don’t guarantee job creation

The data shows no straightforward link between corporate tax rates and employment levels or the number of jobs created. In high-income countries, corporate tax rates have remained relatively stable over time, yet employment levels have gradually increased. Even during periods of economic fluctuation, such as the sharp employment drop in 2020 due to the COVID-19 pandemic, employment trends reflected broader global and economic challenges rather than changes in tax policy. This suggests that broader factors—such as economic policies, business performance, and labour market structures—play a much greater role in shaping employment outcomes than corporate tax rates alone.

In emerging economies, declining corporate tax rates have not resulted in proportional increases in employment. While corporate tax revenues have remained relatively stable, employment trends have only improved under favourable economic conditions, highlighting that tax rates alone are not decisive.

Lower-middle-income countries present even more volatility. Both corporate tax revenue and employment levels vary significantly, reflecting the challenges these economies face in maintaining stable tax systems and fostering formal labour markets. This variability undermines the notion that adjusting corporate tax rates can directly impact employment.

Overall, the evidence challenges the common assumption that lowering corporate tax rates leads to job creation. Instead, it underscores the importance of strong and stable tax systems, supported by comprehensive strategies that address the structural barriers to employment growth.

Figure 3. Corporate income tax (CIT) revenue as a % of GDP and employment rate, 2013-2021, all income groups.

Source 3. Author's elaboration based on IMF WEO and ILO Stat.

The graph shows that corporate tax revenues and employment rates can fluctuate independently in the short term, with broader economic factors such as the COVID-19 pandemic playing a more significant role. While corporate tax revenue as a share of GDP increased notably in 2021, employment levels recovered only partially, underscoring the complex relationship between taxation and job growth

4. When corporations dodge taxes, workers pay the price

The research shows the negative employment impact of profit-shifting practices among Multinationals (MNEs). When MNEs shift profits to low-tax jurisdictions, they divert resources away from investments that could create jobs and stimulate economic growth in the countries where their actual economic activities take place. This imbalance undermines the wage-bargaining position of workers, as diminished reported profitability is often leveraged to suppress wage and employment growth.

Research from Lopez Forero (2021), focusing on French firms, demonstrates the labour market impacts of multinational corporations’ use of tax havens. On average, employment declines by 8.6% following a firm’s establishment in a tax haven. This reduction is driven by tax optimisation strategies, where profits are artificially shifted to low-tax jurisdictions, underestimating domestic value-added. Such practices not only distort wage and employment dynamics but also reduce domestic revenues that could otherwise support public services and job creation.

Figure 4. Average change in the number of workers of French MNEs after relocating to a tax haven

Source 4. Lopez Forero, Margarita, Aggregate Labor Share and Tax Havens: Things Are Not Always What They Seem (2021)

The graph illustrates the average change in the number of workers employed by French multinational enterprises (MNEs) after relocating to a tax haven. The sharp drop following the point of relocation (marked by the vertical line) shows an average decline in employment of approximately 8.6%. This decline reflects the impact of profit-shifting strategies, where MNEs reduce reported domestic profitability, often at the expense of investment in local jobs and wages. The data underscores the link between aggressive tax avoidance and reduced domestic employment.

The PSI-NUTJ briefing note on “why and how to spot profit shifting practices” describes how a corporation that avoids taxes in a high tax country can argue that there is no money for improving wages and working conditions in that same country.

Conclusion and the way forward

The evidence is clear: countries with strong and robust corporate tax systems typically demonstrate stronger employment outcomes, better public services, and more resilient economies. The idea that low taxes drive economic growth is not supported by evidence—high-income countries with effective and efficient tax systems and substantial public investments in infrastructure, innovation, and services tend to outperform those that rely on low-tax strategies.

Unions must take the lead in pushing for progressive tax reforms and collective bargaining strategies that prioritise working people over corporate profits. Limiting corporate tax revenue through a race to the bottom or avoidance tactics weakens the public investments needed for long-term prosperity. Stronger tax policies are not just about fairness—they are essential for sustainable economic growth.

To move forward, policymakers, unions, and advocates must push for concrete reforms that ensure corporations contribute their fair share and that tax systems work for workers, not just corporate profits. Three key actions can help achieve this:

1. Improve Public Country-by-Country Reporting (CbCR) across the world: Requiring MNEs to publish detailed country-by-country reports on their true profits and taxes paid increases transparency and accountability.  As the situation is slowly improving (see for instance the recent Australian win), trade unions must also learn to decrypt the information that is becoming increasingly available to enhance their leverage on their employer’s strategic decisions.

2. Reform international tax rules with unitary taxation: Taxing multinational corporations as single entities based on their global profits would reduce profit-shifting and align taxation with real economic activity. A unitary approach with formulary apportionment ensures corporations contribute fairly in every country where they operate. For effective and transparent international tax governance, this approach must be embedded in a globally inclusive framework with strong enforcement and public reporting. The ongoing UN process on international tax cooperation presents a historic opportunity to establish a fairer system that prioritises tax justice over corporate loopholes.

3. Adopt a global minimum effective tax rate of 25%: Establishing a global minimum corporate effective tax rate of at least 25% would curb harmful tax competition and secure public resources for sustainable investments and job creation.