The Tax Justice Network have discovered that the equivalent of a nurse’s annual salary is lost every second.
By Diogo Augusto
The Tax Justice Network (TJN), an independent international organisation, has released a report on Thursday with as yet unseen figures on tax avoidance.
The report reveals 427 billion dollars in tax are lost each year due to tax avoidance: legal mechanisms that allow companies and individuals to move funds and avoid paying taxes where the wealth was generated.
According to TJN, this is the equivalent of the world losing one nurse’s annual salary every second.
The TJN has been campaigning for 20 years to get the Organisation for Economic Co-Operation and Development (OECD) to release raw data provided by companies and individuals.
Now, for the first time, these figures have been compiled and analysed.
Alex Cobham, President of TJN, said: “We’re in a position now where we can imagine being able to construct a global wealth distribution which would allow you to see the degree of inequality within individual countries. We know that wealth is more unequally distributed than income, and in a pandemic you can see country after country having these discussions about taxing and using wealth to protect public health.”
Tax avoidance is where companies or individuals transfer wealth from where it was originated to different countries which offer tax benefits. This is usually done by setting up several different phantom entities to make tracking the money more difficult.
These tax havens pose a high risk of money laundering and illegal activities. The TJN report, however, focuses on legal processes and labels them as “tax abuse”.
According to the report, the UK and British Overseas Territories are responsible for 37.4% of all tax losses. The United Kingdom’s fiscal rules alone are responsible for other countries losing over 40 million dollars each year: 10% of the world’s total.
The UK has also been impacted by this complex system. The TJN report estimates that one fourth of the UK’s education budget is lost each year in tax avoidance.
However, poorer countries stand to lose more.
Cobham continued by saying that the system is one designed to fail and the lack of will to change it is apparent.
He said: “The Government is now talking about austerity measures. They’re talking about cutting the salaries of […] civil servants and others who have made enormous contributions to keep the country running during the pandemic.
“This is the same government who refuses, illegally, to publish contracts for millions of pounds that have been spent with no track record – in things like producing PPE with companies that are connected to members of the government.
“This is also the government that has a number of senior members, including the Chancellor, with very significant assets which are not fully disclosed to the public.”
The TJN report makes four key recommendations to tackle this issue:
- to introduce an excess profit tax on multinational corporations making these excess profits during the pandemic
- to introduce a wealth tax to fund the COVID-19 response
- to establish a UN tax convention to ensure set, consistent standards for corporate taxation
- necessary tax cooperation between governments to deliver comprehensive, multilateral tax transparency
The UK Treasury declined to comment.