We can define globalization as being a process that increases connectivity while uniting markets and businesses around the world. This emerged in the past 20 years, with the internet having a huge influence since people now have it much easier to communicate, conduct international business and travel. Economies are much more connected to each other so competition is increased.
As globalization evolves, there are many groups that started to promote their beliefs, being either pro the movement or against it. Pro-globalization groups state that the advantage is that there are increased opportunities for all people. Anti-globalization groups state that some people are deprived of resources since they cannot deal with an increased competitive pressure.
When talking about taxation, many fight it, with active groups like Turning Point USA being against it, trying to make the market free. Globalization definitely makes taxation more complicated than it ever was. It is hard to deal with international taxes without having attorneys involved.
What should be mentioned is that the multinational companies are incredibly placed to truly exploit the tax havens that exist around the world, all while hiding profits and avoiding tax. Billions of dollars can basically be used without being taxed. The official estimation is that anywhere up to $200 billion is lost as revenue is not taxed. Corporations practically transfer pricing in order to make up for the missing tax money. They say revenues were being used to sell services or goods to subsidiaries or other companies. We can actually compare this to being money laundering but it is very hard to prove since laws in other countries are different.
The truth is that taxation is quite important for governments and countries. In a rich country, like the US, if less tax is paid, people have to pay more. In a poor country taxation is a big part of getting out of being poor.
Whenever large taxes exist in a country, globalization steps in. Large companies and corporations simply relocate if they are not given preferential taxes. This is possible simply because of the fact that there is the opportunity to work in other countries while having headquarters somewhere else.
What is quite interesting is that, in theory, globalization is a way to reduce the government’s ability to collect taxes. If capital and labor can move between different jurisdictions, attempts to tax factors lead to having a taxpayer that simply vanishes as there is a move done towards a region that has lower taxes.
Economists now largely support globalization because it raises incomes for many as a really competitive business market is established in both rich and poor countries. Basically, having a one world economy balances everything. In the past we just had a few countries that were dominating economy on a global scale. This is no longer the case since globalization allows even smaller players to move around, mainly through the influence of the internet and associated technology.
On the whole, globalization does tend to lower taxes while it improves incomes for many companies that decide to work with the tools they have available.