Collecting tax is one of the key means by which governments are able to address poverty. Yet big business is dodging tax on an industrial scale, depriving governments across the globe of the money they need to invest in healthcare, education and job creation.
Oxfam’s report, “Tax Battles,” launched earlier this week, exposes the world’s worst corporate tax havens and the damaging race to the bottom on corporate tax. Since publication, the role of corporate tax havens has been hotly debated and our research has been attacked by many of the countries on the ‘world’s worst’ list. We have clearly hit a nerve.
World's worst tax havens
Our research, which was painstakingly compiled from a huge range of data sources and externally reviewed by a number of tax experts, is crystal clear why these 15 countries find themselves on the list of the world's worst tax havens.
Many tax havens argue that we have not taken their commitment to increase transparency into account. Yet these commitments have been recognised where they have been made – our point is that these commitments are simply not enough.
For instance, countries are not publishing details of the tax deals they make with corporates; and they do not require corporations to publish financial reports on every country in which they operate. Moreover it is clear transparency alone is not enough. Action is needed to address extreme corporate tax competition such as the provision of tax incentives if we are to end tax dodging and the damaging race to the bottom on corporate tax.
Commitment to transparency welcome, but...
Bermuda’s commitment to greater transparency is welcome but US multinationals still report a much larger proportion of profits in the country than would be expected given the size of their business operations there – the same can be said of Ireland, the Netherlands and Switzerland. This huge gap between where companies pay their tax and where they do their business was one of the key measures in our index.
The government of Barbados stated that Oxfam should be praising the country for lifting its people out of poverty rather than exposing it as a corporate tax haven. But as we explain in our report, for many countries, being a tax haven has not delivered prosperity. We are very interested in further discussion on how working towards a fairer, more sustainable and more diversified economy can benefit Barbados as well as other countries that are losing out because of corporate tax avoidance. It is estimated that developing countries lose $100 billion a year because of corporate tax dodging. This is enough money to provide an education for the 124 million children who aren’t in school and fund healthcare interventions that could prevent the deaths of at least six million children every year.
Citizens demand a fairer tax system
Many tax havens also argue that corporate tax is a matter of national sovereignty. Yet many countries are not freely deciding tax policies and they are certainly not listening to demands from their citizens for a fairer tax system.
Governments are under huge pressure from corporations to provide ever more generous corporate tax incentives and reduce corporate tax rates with little or no public debate. Across the world the sovereign ability of governments to decide to provide vital services like healthcare and education is curtailed as corporate tax revenues dwindle.
If governments want to take back control they must respond to the concerns of their citizens, and cooperate and coordinate on tax to a far greater extent than they are doing at the moment.
Turning the tide
Oxfam is happy to engage in open and constructive discussions on the findings of the report with any government. Our report makes it clear that tax havens are the front runners in a global race to the bottom on corporate tax which has swept up countries around the globe.
In an attempt to attract business, governments around the world are slashing corporate tax bills – damaging their own economies, and those of other countries in the process.
Oxfam is calling for all governments – including tax havens - to act now 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.
- Call for a new generation of international tax reforms aimed at putting a halt to the race to the bottom in corporate tax. Any new negotiation must include developing countries equally.
- 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.
What you can do now
This entry posted by Max Lawson (@maxlawsontin), Head of Policy for Oxfam's Even It Up Campaign, on 16 December 2016.