Tax justice pays dividends – fair corporate taxation grows jobs, shrinks inequality

Governments keep cutting headline corporate‑tax rates in the hope of attracting investment and “creating jobs”. Yet the most comprehensive cross‑country study to date tells a different story. Led by economist Agustina Gallardo –  a leading economist in public-policy evaluation and impact analysis – and developed in close coordination with Public Services International, the Network of Unions for Tax Justice, and a wider group of independent trade‑unionists, the research dismantles the myth that lower corporate taxes automatically translate into more jobs. Instead, it shows that stronger, fairer corporate tax collection underpins both decent employment and a larger share of national income flowing to wages.  

What our cross‑country data reveal  

Using over 600 data points across income groups—tax records going back to the 1990s and job‑and‑wage data for 2013‑21—the study tracks how much tax companies pay, compares it with job numbers, and sees what share of each country’s income ends up in workers’ wages. Three clear signals emerge:  

1. Higher overall tax pressure, including corporate taxes, goes hand‑in‑hand with higher shares of formal employment.  

2. Countries that raise more from corporate tax tend to have a higher labour‑income share — in other words, wages claim a bigger slice of the national pie.  

3. Simply cutting nominal or effective tax rates shows no consistent link with job creation – and often coexists with high informality when enforcement is weak.  

Stronger revenues, stronger formal employment  

Across the countries studied, those that collect more tax overall generally enjoy higher levels of formal employment. In high‑income economies tax pressure hovers around 35 percent of GDP while formal employment stays above 49 percent of the working‑age population – The pattern is steady: countries that take in more tax overall also have more people working in formal jobs. When governments have steady tax income, they can invest in good schools, skills training, innovation and infrastructure — the ingredients that help businesses grow and move workers into secure, formal jobs. By contrast, weak tax takes often coincide with evasion strategies that hide both profits and payrolls.  

Bigger tax take, bigger wage share  

Revenue matters for distribution, too. Across the dataset, countries that raise more from corporate taxes also see a larger share of national income going to wages—a link that stands out most strongly in high‑income economies. Put simply, when companies pay their fair share, workers get more of the value they create.  

Why cutting rates still won’t guarantee jobs  

What about the classic lobbyist claim that lower corporate‑tax rates fuel employment? When the study matches countries’ rates with their formal‑employment levels, it finds no reliable positive link—if anything, the relationship often tilts the other way. Some nations with higher rates enjoy healthy job markets, while many low‑rate economies remain mired in informality. In most cases, the drag on employment comes from weak enforcement and profit‑shifting loopholes, not from the headline rate itself.  

Policy steps unions are putting on the table  

Armed with this evidence, trade‑union movements are pressing for reforms that tie revenue to decent work:  

• Close loopholes and lift effective rates. A nominal 25 percent means little if multinationals whittle it down to single digits through deductions and havens.  

• Adopt unitary taxation with formulary apportionment. Treat multinationals as single firms and apportion profits where real activity happens – especially jobs.  

• Make public country‑by‑country reporting the norm. Shine light on where profits are booked versus where workers are employed.  

Each measure strengthens the revenue–employment–wage chain discussed above, giving governments fiscal space to enforce labour standards and fund active‑labour‑market policies.  

Putting the evidence to work  

This new research reflects a wider historical trend:  countries such ad the United States, Australia, and European nations experienced their strongest periods of economic growth and industrialization during eras with higher corporate tax rates, particularly in the post-World War II period.  

After decades of lies about tax cuts and trickle down economics, working people are angry at an economic system which is not working in their interest. The false promises of job growth from tax cuts peddled by corporate lobbyists have only made things worst. This research finally provides the evidence, debunking the claim that lower corporate taxes support jobs and growth, and helps explain the low-wage, low-growth, high-inequality trap many economies have suffered for decades.  

Such evidence shows the race to the bottom is neither inevitable nor benign.  Fair corporate taxation is a pro‑job, pro‑wage, pro-development policy. These findings can inform budget debates, labour‑law reforms and the emerging UN tax‑agreement discussions.  

Read the full report: Corporate taxation & employment: dispelling the race‑to‑the‑bottom myth.