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COUNTRIES are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals – enough to fully vaccinate the global population against Covid-19 more than three times over.

The 2021 edition of the State of Tax Justice documents how a small club of rich countries with de facto control over global tax rules is responsible for the majority of tax losses suffered by the rest of the world, with lower income countries hit the hardest by global tax abuse.

The findings further galvanise calls to move rule-making on international tax from the OECD to the UN.

The ‘State of Tax Justice 2021’ – published by the Tax Justice Network, the Global Alliance for Tax Justice and the global union federation Public Services International – reports that of the $483 billion in tax that countries lose a year, $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.

Uncounted 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 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.

Tax Justice Network data scientist Miroslav Palanský 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.”

Over 99 per cent of global tax losses countries suffer result from multinational corporations and wealthy individuals utilising abusive tax regulations and loopholes in higher income countries.

The lion’s share of blame among higher income countries falls on members of the OECD (Organisation for Economic Cooperation and Development), a small club of rich countries and the world’s leading rule-maker on international tax.

Despite commitments by OECD members on curbing global tax abuse, OECD members were found to be responsible for facilitating 78 per cent of the tax losses countries suffer a year.

OECD members facilitate the handing over of $378 billion a year from public purses around the world to the wealthiest multinational corporations and individuals.

Rich countries’ vaccine pledges mask plunder of poorer countries taxes

Global tax abuse enabled by rich countries is hitting poorer countries the hardest. While higher income countries lose more tax in absolute terms, $443 billion a year, their tax losses represent a smaller share of their revenues – 9.7 per cent of their collective public health budgets. Lower income countries in comparison lose less tax in absolute terms, $39.7 billion a year, but their losses account for a much higher share of their current tax revenues and spending.

Collectively, lower income countries lose the equivalent of nearly half (48 per cent) of their public health budgets – and unlike OECD members, they have little or no say on the international rules that continue to allow these abuses.

The $483 billion lost to tax havens a year is enough to cover the cost of purchasing and delivering two Covid-19 vaccine doses for the global population three times over8. This is equivalent to vaccinating 1000 people against Covid-19 every second.

The taxes that lower income countries lose to tax havens in a year would be enough to vaccinate 60 per cent of their populations, bridging the gap in vaccination rates between lower income and higher income countries. With their vaccination rates far lower, global tax abuse deals a double blow to lower income countries by robbing them of the funding to protect their populations against Covid-19 and, consequentially, exposing them to an even greater human and economic toll.

Dr Dereje Alemayehu, executive coordinator of the Global Alliance for Tax Justice said: “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”.

Urgency grows for UN to step in

Calls for shifting the responsibility of setting tax rules away from the OECD to the UN gained unprecedented traction this year when the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI) called for a comprehensive overhaul of the global architecture.

The FACTI Panel’s key recommendations draw closely on the work of the tax justice movement, and include the establishment of a UN tax convention, a Centre for Monitoring Taxing Rights at the UN to raise national accountability for illicit financial flows and tax abuse suffered by others, and a globally inclusive, intergovernmental UN forum for the urgent negotiation of further changes to the international tax rules.

Alex Cobham, chief executive at the Tax Justice Network said: “We must re-programme the global tax system to protect people’s well-being and livelihoods over the desires of the wealthiest, or the cruel inequalities exposed by the pandemic will be locked in for good. The State of Tax Justice tells us exactly which countries are responsible for the tax abuse we all suffer. It’s time they were held accountable.”- -Global Tax Justice