Another year, another scandal.
First came #LuxLeaks, then #PanamaPapers. Today, reporters all over the world are covering the Paradise Papers, based on leaked documents from yet another offshore tax firm, showing how international corporations and billionaires hide their fortunes and avoid paying taxes.
Why is Oxfam campaigning on this at all? For one simple reason -- the money sitting in these tax havens could be used to fund schools, hospitals, and help people escape poverty.
Tax, poverty, inequality
This is about more than just basic fairness. This kind of tax dodging causes very real damage.
Corporate tax dodging alone costs poor countries at least $100 billion every year - enough money to provide an education for 124 million children and prevent the deaths of at least six million children.
Many of the companies and individuals involved in these scandals defend themselves by saying, “but this wasn’t illegal!”
That’s a big part of the problem.
— Oxfam International (@Oxfam) November 5, 2017
The tax system benefits the rich
In too many places, tax codes are purposefully riddled with loopholes to benefit the wealthiest. Super-rich corporations and individuals spend millions of dollars lobbying to make sure that their fortunes stay safe.
Just look at the current tax reforms under debate right now in the United States. The plan would create new incentives for companies to stash even more funds in tax havens, starving government agencies of badly-needed funds to help the poorest. It’s Robin Hood in reverse.
The other part of the problem is the so-called “race to the bottom,” where countries take turns slashing corporate tax rates and offering incentives in a frenzied bid to attract investment.
The truth is, corporate taxes are lower than they’ve been in decades in many countries. The average rate across G20 countries was 40 percent in 1990; today, it’s less than 30.
— Oxfam International (@Oxfam) November 6, 2017
So where do we go from here?
One thing’s clear — the “fixes” that have been tried barely scratch the surface of the problem.
The OECD and the G20 have promoted the “BEPS” tax reforms, and have managed to persuade more than 100 countries to sign on. This process though does little to prevent the use of tax havens, and limits how much poor countries can get out of the process.
Furthermore, the “blacklist” of tax havens that these two organizations published earlier this year contained just one country on it - a sharp disconnect with the real picture that scandals like this one paint.
Three key ways to End Tax Havens
Here are three things that need to happen to get to the root of the problem:
- We need a real blacklist, one based on objective, comprehensive criteria, and free from political interference. Listed countries should face stiff penalties.
- To end tax secrecy, we need transparency. Governments should make multinational companies report publicly their financial information to see where they do business and where they pay taxes. They should also establish a publicly-available, centralized register of companies, foundations and trusts, and we should know who their real owners are. This will make it easier to follow the money.
- Finally, we need a second round of tax reforms to build on the BEPS process, but this time around, it should work in favor of all countries, and not just the wealthiest.
These changes take a lot of time and effort, but most importantly, they take political will.
Otherwise, the super-rich will keep siphoning billions of dollars away from our homes and into their offshore accounts.
This entry posted by Simon Hernandez-Arthur, Oxfam Media Officer, on 5 November 2017.