The Tax Justice Network (TJN) has published its annual tax justice report; showing countries are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals.
The group estimates that $312 billion is lost to cross-border corporate tax abuse by multinational corporations, and $171 billion is lost to offshore tax evasion by wealthy individuals.
The $483 billion loss consists of only direct tax losses – that is, tax losses that can be observed from analysing data self-reported by multinational corporations and from banking data collected by governments.
Not counted in this estimate are the indirect losses: the chain-reaction losses that arise from tax abuses accelerating the race to the bottom and driving tax rates down globally.
The TJN estimates that South Africa alone is losing $3.5 billion (R55 billion) a year – around 1% of the country’s total GDP. The majority of this lost money – around R45 billion – is lost through multinational corporations exploiting loopholes and utilising tax havens.
The IMF estimates that indirect losses from global tax abuse by multinational corporations are at least three times larger than direct losses. No equivalent estimate exists for the indirect losses of offshore tax evasion, it said.
“The $483 billion lost to tax havens a year is the tip of the iceberg. It’s what we can see above the surface thanks to some recent progress on tax transparency, but we know there’s a lot more tax abuse below the surface, costing magnitudes more in tax losses,” said TJN data scientist Miroslav Palanský.
An issue that needs to be addressed
“The richest countries, much like their colonial forebearers, have appointed themselves as the only ones capable of governing on international tax, draped themselves in the robes of saviours and set loose the wealthy and powerful to bleed the poorest countries dry,” said Dr Dereje Alemayehu, executive coordinator of the Global Alliance for Tax Justice.
“To tackle global inequality, we must tackle the inequality in power over global tax rules. Rules on where and how multinational corporations and the superrich pay tax must be set at the UN in the daylight of democracy, not by a small club of rich countries behind closed doors.”
The group has specifically called on the United Nations to introduce the following:
- An excess profit tax on multinational corporations making excess profits during the pandemic, such as global digital companies, to cut through profit shifting abuses. Multinational corporations’ excess profit would be identified at the global level, not the national level, to prevent corporations from underreporting their profits by shifting them into tax havens, and taxed using a unitary tax method.
- A wealth tax to fund the Covid-19 response and address the long term inequalities the pandemic has exacerbated, with punitive rates for opaquely owned offshore assets and a commitment between governments to eliminate this opacity. The pandemic has already seen an explosion in the asset values of the wealthy, even as unemployment has soared to record levels in many countries.