Losses in revenue due to tax avoidance or tax abuse by multinational companies and rich individuals cost countries $427 billion a year, as per a study by the global advocacy group The Tax Justice Network (TJN). The group also claims to have pioneered the public access to such elaborate information, and hopes that developed and emerging market countries would unanimously tighten the current rules in the upcoming G20 meeting.
Reportedly, more than half of the losses-$245 billion-came about in the process of shifting profits worth $138 trillion to countries with lax, or nonexistent corporate laws. The TJN said it had been able to put a figure on the extent of corporate tax evasion owing to the data that is self-reported by multinationals and published by the Organisation for Economic Co-operation and Development (OECD). The data accessed by the TJN however, did not reveal the identities of individual companies; OECD ensured that no individual company can be identified.
Regarding private individuals, the data indicates that they paid $182bn less in tax than they were supposed to, by storing financial assets worth more than $10tn, offshore. As a remedial strategy, the TJN suggested for the G20 to require the documentation and publication of the profits made by individual multinationals on a country-by-country basis so that the "corporate tax abusers and the jurisdictions that facilitate them can be identified and held to account." This becomes even more imperative given the allocations of public finances are majorly reserved for pandemic management.
According to the report, major contributors' for the collective tax losses for countries were the Cayman Islands, a British overseas territory, responsible more than $70bn (16.5%) of global tax losses; the UK (10%, $42bn); the Netherlands (8.5%, $36bn); Luxembourg (6.5%, $27bn) and the US (5.5%, $23bn).
"A global tax system that loses over $427bn a year is not a broken system, it's a system programmed to fail. Under pressure from corporate giants and tax-haven powers like the Netherlands and the UK's network, 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," said Alex Cobham, chief executive of the TJN.