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tax justice network
Tax Dodging by Super-Rich, Big Corporations Costs Nations Half a Trillion Per Year: Study
"The U.K. and the U.S. are both among the biggest enablers and the biggest losers of this lose-lose tax system," said the chief executive of the Tax Justice Network.
Nov 19, 2024
A study published Tuesday estimates that tax dodging enabled by the United States, the United Kingdom, and other wealthy nations is costing countries around the world nearly half a trillion dollars in revenue each year, underscoring the urgent need for global reforms to prevent rich individuals and large corporations from shirking their obligations.
The new study, conducted by the Tax Justice Network (TJN), finds that "the combined costs of cross-border tax abuse by multinational companies and by individuals with undeclared assets offshore stands at an estimated $492 billion." Of that total in lost revenue, corporate tax dodging is responsible for more than $347 billion, according to TJN's calculations.
"For people everywhere, the losses translate into foregone public services, and weakened states at greater risk of falling prey to political extremism," the study reads. "And in the same way, there is scope for all to benefit from moving tax rule-setting out of the OECD and into a globally inclusive and fully transparent process at the United Nations."
The analysis estimates that just eight countries—the U.S., Canada, the U.K., Japan, Israel, South Korea, Australia, and New Zealand—are enabling large-scale tax avoidance by opposing popular global reform efforts. Late last year, those same eight countries were the lonely opponents of the United Nations General Assembly's vote to set in motion the process of establishing a U.N. tax convention.
According to the new TJN study, those eight countries are responsible for roughly half of the $492 billion lost per year globally to tax avoidance by the rich and large multinational corporations, despite being home to just 8% of the world's population.
"The hurtful eight voted for a world where we all keep losing half a trillion a year to tax-cheating multinational corporations and the super-rich," Alex Cobham, chief executive of the Tax Justice Network, said in a statement Tuesday. "The U.K. and the U.S. are both among the biggest enablers and the biggest losers of this lose-lose tax system, and their people consistently demand an end to tax abuse, so it's absurd that the U.S. and U.K. are seeking to preserve it."
"It's perhaps harder to understand why the other handful of blockers, like Australia, Canada, and Japan, who don't play anything like such a damaging role, would be willing to go along with this," Cobham added.
TJN released its study as G20 nations—a group that includes most of the "hurtful eight"—issued a communiqué pledging to "engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed." Brazil, which hosted the G20 summit, led the push for language calling for taxation of the global super-rich.
The document drew praise from advocacy groups including the Fight Inequality Alliance, which stressed the need to "transform the rhetoric on taxing the rich into global reality."
The communiqué was released amid concerns that the election of far-right billionaire Donald Trump in the U.S. could derail progress toward a global solution to pervasive and costly tax avoidance.
The new TJN study cites Trump's pledge to cut the statutory U.S. corporate tax rate from 21% to 15% and warns such a move would accelerate the global "race to the bottom" on corporate taxation.
"People in countries around the world are calling in large majorities on their governments to tax multinational corporations properly," Liz Nelson, TJN's director of advocacy and research, said Tuesday. "But governments continue to exercise a policy of appeasement on corporate tax."
"We now have data from these governments showing that when they asked multinational corporations to pay less tax, the corporations cheated even more," Nelson added. "It's time governments found the spines their people deserve from their leaders."
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UN Tax Convention Presents Historic 'Opportunity to Create Well-Being for All'
"At the U.N., low- and middle-income countries are in the majority, and they want a fair system where their voices are heard."
Apr 30, 2024
Tax justice advocates this week are expressing hope that delegates at a United Nations summit aimed at drafting an international tax convention will take the "once-in-a-century opportunity," as one campaigner and researcher said, to place the common good at the center of the global tax system instead of individual and corporate greed.
Representatives of U.N. member states are meeting for the Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework on International Tax Cooperation, following decades of campaigning by countries in the Global South.
"It's happening," said Rebecca Riddell, policy lead for Oxfam America. "The start of historic negotiations for a fairer global tax system. We're here because of the leadership of African countries. Because of the 125 states that voted yes. And because of tireless civil society efforts."
The U.N. General Assembly passed a resolution last November calling for the meeting, with the committee required to submit "terms of reference to the General Assembly by August and a final vote on a tax convention framework expected by the end of 2025.
At the Tax Justice Network (TJN), Sergio Chaparro-Hernandez wrote last week that the negotiations are taking place with an "unprecedented level of transparency," with civil society groups able to account for the positions adopted by each state.
Another "noteworthy development" as the meeting gets underway, said Chaparro-Hernandez, is that "several of the 48 countries that had voted against Resolution 78/230 last year are now actively participating in the process."
"The European Union, for example, which voted as a bloc against the resolution last year, accepted the path set out by the resolution by stating in its initial statement at the organizational session that, 'the UN framework convention on tax cooperation can and should serve to further promote tax transparency and fair taxation,'" he added.
Along with TJN, other civil society groups including the Center for Economic and Social Rights (CESR), Eurodad, and Greenpeace are participating in the committee meeting and lobbying for a far-reaching convention framework that will "redefine the pillars of the international tax system and to make it fully inclusive, just, and effective."
"At the U.N., low- and middle-income countries are in the majority, and they want a fair system where their voices are heard," said Maria Ron Balsera, a researcher at CESR.
Under current global tax rules, the wealthiest individuals and corporations pocket $480 billion each year through the use of tax havens and other forms of tax evasion, said Greenpeace on Tuesday, "most countries just can't cover people's basic needs, nor meet their climate and biodiversity targets and commitments."
"The U.N. Tax Convention is a historical opportunity to create well-being for all, by moving decision-making power from a few rich [Organization for Economic Cooperation and Development] countries to the U.N. where every country has a vote," said the group.
Chenai Mukumba, executive director of Tax Justice Network Africa, spoke to attendees of the committee meeting about prioritizing mechanisms to crack down on tax evasion.
"While we flag the importance of this work to developing countries, we cannot overemphasize that inclusive and effective tax cooperation is important that has benefits for our global community," said Mukumba. "The international community as a whole is better off when we have more countries that have resources and capacity to provide their citizens with essential services."
On Monday, Greenpeace Africa's pan-African political strategist Fred Njehu wrote to Ramy Mohamed Youssef, chair of the U.N. Tax Convention Committee, and addressed him not only as an advocate but as "a dad, a concerned citizen, and a taxpayer."
Changing global tax rules and ensuring the wealthy pay their fair share, said Njehu would unlock "the money for everyone’s basic needs and the recovery of climate and nature."
"We both know that this is mostly because multinational corporations have been exploiting the majority of the world for way too long, and governments in some rich countries have facilitated it," said Njehu. "They're making billions on the destruction of the world and our suffering. And then, they hide their profits in tax havens. A downward spiral where wealth and power have become so concentrated as to threaten democracy, civilization, and the living world we're part of."
"Mr. Youssef, you have a big responsibility and a unique opportunity to turn things around this year," he added. "Civil society, academics, and countries that represent 80% of the world’s population are backing you and your colleagues at the U.N. Tax Convention Committee to change the global tax rules, which are critical for how the global economy works... Now we need equality, transparency and accountability. Polluters must pay and the wealthy must be taxed fairly."
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OECD Pushed Australia to Drop Plan Aimed at Showing Where Corporations Pay Taxes
"What little credibility the OECD had is now in tatters," said one campaigner. "The OECD makes promises about ending global tax abuse but was evidently doing everything it could behind closed doors to protect tax abusers."
Jul 08, 2023
The Financial Timesconfirmed Friday that the Organization for Economic Cooperation and Development lobbied Australia to weaken a law that would have compelled about 2,500 highly profitable multinational corporations to reveal where they pay taxes, eliciting outrage from tax justice advocates.
Citing two unnamed people familiar with the discussions, FT reported that the Paris-based club of wealthy nations "pressured Australia's ruling Labor government to drop a crucial part of a new finance bill that would have required some multinationals to publicly disclose their country-by-country tax bills."
"This shows the true colors of the OECD."
According to the newspaper, "The OECD, which has driven efforts to force the world's largest companies to pay their fair share of tax, believed the bill would have undermined its own efforts to make multinationals' affairs less opaque."
Campaigners were incredulous given that the legislation the OECD enfeebled "would have delivered the biggest transparency breakthrough to date on the taxes of multinational corporations," as the Tax Justice Network put it.
The advocacy group estimates that multinationals shift more than $1.1 trillion of profit into tax havens annually, costing the world $312 billion per year in foregone corporate tax revenue. It also calculates that at least 1 of every 4 of those lost tax dollars could be saved if corporations were required to publish country-by-country reporting data.
"The OECD yet again doing the bidding for big business, the only winners here," tweeted Nabil Ahmed, economic justice director at Oxfam America.
Ahmed's observation was shared by Isabel Ortiz, the former director of social protection at the United Nations' International Labor Organization, who said, "This shows the true colors of the OECD and who [it is] serving."
Australia's original proposal "would have exposed unprecedented details about companies' tax affairs in each country they operate," FT reported, aiding efforts to crack down on tax evasion by forcing an estimated 21% of the world's multinational corporations—including many of the biggest firms in history—to come clean about "how much of their revenues are booked in low-tax jurisdictions."
As the newspaper explained:
The bill was expected to clear the Australian parliament in June and come into force on July 1. However, the version of the bill that passed last month removed crucial disclosures, with the Australian government announcing a delay of the planned public country-by-country tax reporting regime for a year.
People close to the decision said officials from the intergovernmental body had stressed to the Australian Treasury that countries that signed the 2015 OECD agreement did so on the basis the tax reports would not become public.
"This is not a good look for the OECD," the Fair Tax Foundation wrote on social media. "Their work is by definition consensus-based and often lowest common denominator. If a country wants to push on and do something more substantial, they should applaud, not oppose."
David McNair, executive director of global policy at the anti-poverty nonprofit One, argued that "this story seriously undermines the OECD's credibility in the one area that it was leading in recent years."
"I hope it prompts some soul searching on the mission and values of the organization," he added.
"OECD has put itself firmly on the side of secrecy—on the side of tax abuse—against one of its members. That's an extraordinary state of affairs."
As FT observed, "For the past decade the OECD has spearheaded global efforts to close loopholes and restrict the use of tax havens after it was asked by the G20 in 2013 to address the growing problem of corporate tax avoidance."
"While large multinationals already report some country-by-country data to tax authorities under an international agreement brokered by the OECD in 2015, the Australian proposal would have disclosed additional new data points," the newspaper noted. "And crucially the OECD country tax reports are not shared with the public."
FT's article corroborates earlier reporting by the Center for International Corporate Tax Accountability and Research (CICTAR) and the Tax Justice Network.
Two weeks ago, immediately after the Australian government unexpectedly postponed key components of its landmark bill, both groups suggested that "lobbying against the legislation by multinational corporations and their professional enablers may have been bolstered by the OECD itself—the organization which claims to set international tax rules in order to reduce corporate tax abuse."
In the wake of FT's bombshell story, Tax Justice Network chief executive Alex Cobham said in a statement that "what little credibility the OECD had is now in tatters."
"The OECD makes promises about ending global tax abuse," said Cobham, "but was evidently doing everything it could behind closed doors to protect tax abusers."
The Australian law opposed by the OECD – which may yet be adopted despite the delay – would force one 1 in 5 multinational corporations around the world to come clean about their profits and taxes. This includes many of the world’s biggest multinational corporations... pic.twitter.com/9j3KqNPee4
— Tax Justice Network (@TaxJusticeNet) July 8, 2023
Cobham called it "genuinely shocking to see it confirmed that the OECD has lobbied its own member country against introducing a key measure to fight corporate tax abuse."
"Public country-by-country reporting, when it arrives, will increase revenues around the world to the tune of billions of dollars, by exposing the most egregious profit shifting," Cobham continued. "Investors will benefit from reduced risk in their shareholdings, and employees will benefit both from lower risk and from the chance to negotiate fairly based on a true reporting of the profits of their work. Smaller and domestic businesses will benefit from a more level playing field, instead of a system that subsidizes multinationals' tax bills by effectively granting them immunity from abuse."
"OECD has put itself firmly on the side of secrecy—on the side of tax abuse—against one of its members. That's an extraordinary state of affairs," he added. "And it couldn't send a clearer signal to countries wondering whether the OECD's proposed tax rules will help them to curb tax abuse. They won't, and countries should pursue their own alternatives while preparing for negotiations to establish a proper tax body at the United Nations instead."
Supporters of UN tax leadership have pointed to the OECD’s failure to meaningfully include most countries in its rulemaking process – a concern unlikely to be eased by news of the OECD lobbying its own member against introducing a key measure to fight corporate tax abuse.
— Tax Justice Network (@TaxJusticeNet) July 8, 2023
As economic historian Adam Tooze pointed out, the OECD strong-armed Australia's left-leaning government while being led by Mathias Cormann, a right-wing Australian who previously served as the country's finance minister.
On Saturday, Cormann said in a statement that "the OECD has a proud record of facilitating global cooperation on tax policy and administration, to help ensure globally effective measures to tackle multinational tax avoidance."
"Suggestions the OECD pressured Australia into weakening legislation to tackle such tax avoidance are false," he claimed.
Cobham criticized Cormann's response, pointing out that the OECD secretary-general goes on to admit that the body's experts "raised a number of technical issues," after which Australian lawmakers watered down their proposal.
According to Cobham, the "possible unintended consequences" brought up by OECD experts are "flat wrong." He added that "Cormann seems to have confessed that the OECD did lobby Australia to weaken their proposals to fight corporate tax abuse... and also that they used a false threat to do so—one which, as experts in their own standard, they surely knew was erroneous."
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