$427bn lost annually to tax evasion, reveals report

20 Nov, 2020 by https://www.sharecast.com/

Tax Justice Network reported that $427bn is stolen annually by companies and individuals who avoid paying taxes and called for the G20 to tighten rules.

As pandemic-fatigued countries around the world struggle to cope with second and third waves of coronavirus, the ground-breaking study published Friday, revealed for the first time how much public funding each country loses to global tax abuse and identifies the countries most responsible for others’ losses.

In the review, it said that over half the losses ($245bn) came from companies shifting $1.38tn of profits out of the organisation’s member countries to tax havens.

It also found that private individuals paid $182bn less tax than they should have by storing a total of more than $10trn in financial assets offshore.

While higher income countries lose more tax to global tax abuse, the report revealed that the losses bear much greater consequences in lower income countries.

Higher income countries altogether lose over $382bn every year whereas lower income countries lose $45bn. However, lower income countries’ tax losses are equivalent to nearly 52% of their combined public health budgets, whereas higher income countries’ tax losses are equivalent to 8% of their combined public health budgets.

The report also provided strong evidence to date that the greatest enablers of global tax abuse are the rich countries at the heart of the global economy and their dependencies.

Higher income countries are responsible for 98% of countries’ tax losses, costing countries around the world over $419bn in lost tax every year while lower income countries are responsible for just 2%, costing countries over $8bn in lost tax every year.

The five jurisdictions most responsible for countries’ tax losses are British Territory Cayman (responsible for 16.5% of global tax losses, equal to over $70bn), the UK (10%; over $42bn), the Netherlands (8.5%; over $36bn), Luxembourg (6.5%; over $27bn) and the US (5.53%; over $23bn).

The Tax Justice Network is calling on the G20 heads of state summit this weekend to require the publication of individual multinationals’ country by country reporting, so that corporate tax abusers and the jurisdictions that facilitate them can be identified and held to account.

Alex Cobham, chief executive of the Tax Justice Network, said: “A global tax system that loses over $427bna year is not a broken system, it’s a system programmed to fail. Our governments have programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else. The pandemic has exposed the grave cost of turning tax policy into a tool for indulging tax abusers instead of for protecting people’s wellbeing.

“Now more than ever we must reprogramme our global tax system to prioritise people’s health and livelihoods over the desires of those bent on not paying tax.”