OECD Trap

The OECD Trap refers to a situation where countries are pressured by international tax rules to lower or eliminate corporate taxes on profits earned abroad, aiming to prevent tax avoidance. However, this can lead to reduced government revenue, limiting funds for public services. As a result, countries might become overly dependent on foreign companies’ investments and profits, hindering their economic independence and ability to invest domestically. Essentially, it’s a balance issue where efforts to prevent tax avoidance can unintentionally weaken a country’s fiscal capacity and economic sovereignty.