Global tax evasion put at $427bn a year
23 Nov 2020
Countries are losing a total of over $427bn (£319bn) in tax each year to international corporate tax abuse and private tax evasion, according to analysis from campaigning group the Tax Justice Network
23 Nov 2020
Its inaugural annual report on global tax abuse calculates $245bn is directly lost as a result of profit shifting by multinational corporations and $182bn to private tax evasion through holding financial assets offshore.
Higher income countries altogether lose over $382bn every year whereas lower income countries lose $45bn.
However, the group argues that the impact is greater on lower income countries because of their smaller tax take, saying lower income countries lose the equivalent of 5.8% of the total tax revenue they typically collect a year to global tax abuse, whereas higher income countries on average lose 2.5%.
According to the report, higher income countries are responsible for 98% of countries’ tax losses, amounting to over $419bn in lost tax every year, while lower income countries are responsible for only 2%, costing countries over $8 billion in lost tax every year.
The five jurisdictions most responsible for countries’ tax losses are named in the report as the Cayman Islands (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 report claims that its analysis of the jurisdictions on the EU tax haven blacklist found this group of countries to be collectively responsible for 1.72% of global tax losses, costing over $7bn in lost tax a year.
In comparison, it says EU member states are responsible for 36% of global tax losses, costing countries over $154bn in lost tax every year.
Alex Cobham, chief executive of the Tax Justice Network, said: ‘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.
‘We’re calling on governments to introduce an excess profit tax on large multinational corporations that have been short-changing countries for years, targeting those whose profits have soared during the pandemic while local businesses have been forced into lockdown.
‘For the digital tech giants who claim to have our best interests at heart while having abused their way out of billions in tax, this can be their redemption tax. A wealth tax alongside this would ensure that those with the broadest shoulders contribute as they should at this critical time.’
The State of Tax Justice 2020 is here.
By Pat Sweet