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TAX dodging by multi-national corporations costs poor countries at least $100 billion every year, an Oxfam International report has revealed.
The global non-governmental organisation estimates that this money is enough to finance education welfare for about 124 million children who are not in school and fund healthcare interventions that could prevent the deaths of at least six million children every year.
In its latest report this week on the world’s worst corporate tax havens, Oxfam reveals a dangerous race to the bottom on global corporate tax, largely steered by the so-called developed world.
Singapore, Hong Kong, Mauritius, Bermuda, the Netherlands, Ireland, British Virgin Islands and Luxembourg, are among the world’s 15 worst corporate tax havens, according to new Oxfam research published Monday.
Esme Berkhout, tax policy advisor for Oxfam said: “Corporate tax havens are helping big business cheat countries out of billions of dollars every year. They are propping up a dangerously unequal economic system that is leaving millions of people with few opportunities for a better life.”
The report ‘Tax Battles’, reveals how these tax havens are leading a global race to the bottom on corporate tax that is starving countries out of billions of dollars needed to tackle poverty and inequality.
“Countries across the world are slashing corporate tax bills as they compete for investment. The average corporate tax rate across G20 countries was 40 percent 25 years ago — today it is less than 30 percent,” said Oxfam in a statement.
“The use of unproductive and wasteful tax incentives is also ballooning — particularly in the developing world.”
Oxfam researchers compiled the ‘world’s worst’ list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency).
Oxfam said tax incentives, for instance, cost Kenya $1.1 billion a year — almost double their entire national health budget.
“When corporate tax bills are cut, governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people,” it said.
According to Oxfam a 0.8 percent cut in corporate tax rates across the Organisation for Economic Cooperation and Development (OECD) countries between 2007 and 2014 was partially offset by a 1.5 percent increase in the average standard VAT rate between 2008 and 2015.
“There are no winners in the race to the bottom on corporate tax. Ordinary people — particularly the poorest — are paying the price for this reckless competition through increases in personal taxes and cuts to essential services, such as healthcare and education. Governments must work together to stop this crazy race to the bottom on corporate tax and ensure companies pay their fair share,” read the statement.
Many of the countries on the ‘world’s worst’ list have been implicated in tax scandals. Ireland, for instance, hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. The British Virgin Islands is said to be home to more than half of the 200 000 offshore companies set up by Mossack Fonseca — the law firm at the heart of the Panama Papers scandal.
Oxfam has since called for all governments to work together to stop tax dodging and the race to the bottom on corporate tax.
It recommended that states stop unfair and unproductive tax incentives and work together to set corporate tax at a level that is fair, progressive and contributes to the collective good.
There is also a need to improve tax transparency by requiring all multinational companies to publish financial reports for every country in which they operate, so it is clear what taxes companies are paying and where, it said.
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