George Turner ■ New estimates reveal the extent of tax avoidance by multinationals
New figures published today by the Tax Justice Network provide a country-level breakdown of the estimated tax losses to profit shifting by multinational companies. Applying a methodology developed by researchers at the International Monetary Fund to an improved dataset, the results indicate global losses of around $500 billion a year. The figures appear in a study published today by the United Nations University World Institute for Development Economics Research (UNU-WIDER, in Helsinki).
While this global total is more cautious than the $600 billion estimate of the IMF researchers, the distribution is also different. Losses are now estimated to be even more intense in lower-income countries in relation to GDP and as a proportion of total tax revenues. In addition, today’s estimates include the full country breakdown.
Profit shifting is the process whereby companies move profits from their subsidiaries in higher tax countries, where the real economic activity takes place, to other subsidiaries in ‘tax havens’. This is typically achieved by the multinational company setting up internal trades which exploit international tax rules to move taxable profits from one jurisdiction to another.
Profit shifting has been a big focus of international attention since scandals at companies like Apple and Amazon revealed the scale of distortions – and the systemic nature of avoidance schemes marketed by big 4 accounting firms was then laid bare in the ‘LuxLeaks’ revelations.
Tax Justice Network Chief Executive, Alex Cobham and Petr Janský of Charles University in Prague, carried out the analysis which recreates the methodology of a study published by researchers at the International Monetary Fund in 2016. Cobham and Janský replicate the IMF analysis, and then repeat it using a more robust source of national tax revenue data.
The data showed that whilst the largest losses occurred in rich economies such as the United States, lower-income countries were the biggest victims of profit shifting. Some countries, such as Argentina (4.42%) lost a significant proportion of their GDP to profit shifting. In Chad, the estimated losses to profit shifting were larger than all of the (non-resource) taxes collected in the country that year. In Pakistan the losses were 40% of tax revenues. While any estimates of this deliberately hidden phenomenon are necessarily uncertain, the order of magnitude indicates that the economic development of countries may in some cases be significantly undermined by the activities of multinational companies.
The calculated losses to individual countries can be seen in this interactive global map:
A spreadsheet with the data can be found here: https://docs.google.com/spreadsheets/d/1r7jdXvQ1NaGjUUkH1afniE3xvTyCu7NC8BZWZjkkQ-k/edit?usp=sharing
The study was published as part of the WIDER working paper series. A link to the full study can be found here: https://www.wider.unu.edu/node/74539
Picture Credit: Sean Davis on Flickr
Comments • 3
All around the globe communities and societies are parasitised by corporate and financial institutions, diverting resources into opaque dark-economy networks, at the heart of which is a consortium of tax-havens, and their governments, as accomplices, are betraying the trust invested in them by their citizens, and should be held accountable.
It’s not until you read articles such as those produced by the Tax Justice Network, that anyone can appreciate the sheer scale of toxic and deadly jerrymandering and rigging of the financial theft by any means may be fully understood. It is truly mindboggling that Charities spend so much money on advertising for donations, trying to feed and clothe the poorest in the world, when so much wealth exists that would, if that wealth could be taxed fairly, relieve so much of the poverty existing today. All those who dilligently assist the already rich, cheat others of the money they owe, are just as guilty as the debauched uber exploiters themselves and in a way, so are all of us who choose to look the other way and do nothing. I wish I knew what I could do. I’ll reblog the articles as I come across them(I came across this site from a blogger I subscribe to)and hope that others pick it up.
In Romania, casino games and bet games are registered in Malta (offshore tax heaven) and approved by the government and the regulation agency of trade ONRC . In Bucharest, the bet games are each other close.