Governments around the world lose nearly $ 500 billion in tax revenue a year due to global tax abuse, according to a new report.
The State of Tax Justice 2021 – released Tuesday by the Tax Justice Network, the Global Alliance for Tax Justice and the International Public Services Global Union Federation – found countries are missing $ 312 billion a year due to the tax abuse of multinational corporations and an additional $ 171. billion via personal tax avoidance.
TJN’s data scientist Miroslav PalanskÃ½ said in a statement that these figures, which represent direct government losses, are probably only “the tip of the iceberg”.
The International Monetary Fund has estimated that the race to the bottom between tax havens has caused additional indirect losses by lowering global tax rates, and the indirect impact of tax abuse by multinational corporations is at least three times greater. important than direct losses, according to the report.
Amid the ongoing COVID-19 pandemic, the report defines the extent of tax evasion – and the disparate impact on low-income countries – through the lens of public health. Using data on the cost of delivering vaccines, TJN estimates that the $ 483 billion in global tax losses would be enough to immunize the entire world three times. And while low-income countries lose far less tax revenue – $ 40 billion – than richer countries, that figure represents almost half of those countries’ public health budgets.
âThe parallels to global tax injustice are stark,â the report says. “As the Pandora Papers once again pointed out, the failure of international rules for the taxation of multinational corporations and offshore income and wealth is played out in a predictable way.”
The report identifies the wealthy countries that make up the Organization for Economic Co-operation and Development, a group that sets global tax rules, as the source of most of the world’s tax abuse. OECD members and their dependencies are responsible for 78% of all global tax losses, including more than 90% of individual tax evasion, according to TJN’s analysis.
It calls on the United Nations to step in and take on the role of the OECD as the body of global tax standards, a recommendation that reflects the findings released by the United Nations High-Level Panel on Transparency, Accountability and Taxation. financial integrity (FACTI) in February.
“The richest countries, just like their colonial ancestors, designated themselves as the only ones capable of ruling on international taxation, draped themselves in the dresses of the saviors and let go of the rich and the powerful to bleed the poorest countries dry. poorer, “said Dr Dereje. Alemayehu, executive coordinator of the Global Alliance for Tax Justice, said in a statement. “The rules on where and how multinational corporations and super-rich pay taxes must be set at the UN in the light of democracy, not by a small club of rich countries behind closed doors.”
Last month, 136 countries and territories signed an agreement led by the OECD and the United States that would institute a global minimum corporate tax rate of 15% and require multinational companies to pay taxes in countries where they operate. carry out their activities. But TJN chief executive Alex Cobham said at the time the measures were watered down and maintained strong incentives for multinationals to shift profits.
The TJN report found that the United States is responsible for other countries losing nearly $ 20 billion in tax revenue per year, a figure surpassed only by the Cayman Islands and the United Kingdom. As part of the Pandora Papers investigation, the International Consortium of Investigative Journalists revealed the growing role of the United States as a catalyst for illicit financial flows.
âWhat was fantastic and downright fascinating about the Pandora Papers is the way they are focused on the United States,â investigative reporter Casey Michel said during a webinar on âAmerican Kleptocracyâ Wednesday. , his next book on the rise of the United States as a major player in the offshore. industry. âThe United States is now at the center of all these networks. “
The Pandora Papers were also brought up this week during a hearing of the US Helsinki Commission on Combating Foreign Corruption and Kleptocracy. Scott Greytak, advocacy director at Transparency International’s US office, cited ICIJ information on how Jho Low, the financier at the heart of the 1MDB scandal in Malaysia, used subsidiaries of US law firm Baker McKenzie to set up a business network despite ‘manual definition’ of a high risk customer.
Greytak called on Congress to pass new legislation, such as the ENABLERS Act introduced days after the release of the Pandora Papers in October, which would require law firms, investment advisers or other parties involved in the creation of companies to perform due diligence checks on potential customers.
In addition to calling on the UN to play a greater role in global taxation, the report also recommends that governments introduce a tax on the excess profits of multinational companies and a tax on personal wealth to combat growing inequalities. that have been exacerbated by the pandemic.
âTaxation may be our most powerful tool in tackling inequality, but instead it has been made entirely optional for the super-rich,â Cobham said in a statement Tuesday. “It is time they were held accountable.”