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Alex Cobham, Javier Garcia-Bernardo, Miroslav Palansky, Mark Bou Mansour ■ The State of Tax Justice 2020

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The State of Tax Justice 2020

Countries are losing a total of over $427 billion in tax each year to international corporate tax abuse and private tax evasion, costing countries altogether the equivalent of nearly 34 million nurses annual salaries every year – or one nurse’s annual salary every second.

The State of Tax Justice 2020, a first-of-its-kind annual report by the Tax Justice Network, reveals for how much tax each country in the world loses to international corporate tax abuse and private tax evasion. While there have been estimates in the past about the tax lost globally to tax abuse, it has been difficult to determine how much each country loses individually – until now. After nearly two decades of campaigning by the Tax Justice Network, the OECD (an intergovernmental body of rich countries and a leading rules-setter on international tax) finally released game-changing transparency data in July 2020 on multinational corporations’ financial affairs, making it possible to estimate each country’s tax losses with unprecedented accuracy by analysing the new data.

The State of Tax Justice 2020 also provides an annual snapshot of countries’ rankings on the Tax Justice Network’s Corporate Tax Haven Index and Financial Secrecy Index and their vulnerability to illicit financial flows as tracked by the Tax Justice Network’s vulnerability tracker.

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Key findings

  • Countries are losing over $427 billion in tax each year to international corporate tax abuse and private tax evasion. That’s nearly 34 million nurses’ yearly salaries lost every year, or one nurse’s yearly salary every second.
  • More tax is lost to tax havens ever year due to corporate tax abuse by multinational corporations then due to private tax evasion by individuals. Multinational corporations short-change countries out of $245 billion in tax every year while people who mover their wealth offshore short-change their governments out $182 billion less in tax every year.
  • Higher income countries lose a lot more tax than lower income countries, but the impact of those tax losses are far greater on lower income countries public spending. Higher incomes countries tax losses are equal to 8 per cent of their public health budgets while lower incomes countries tax losses are equal to over half their public health budgets.
  • Almost all responsibility for global tax losses falls on higher income countries. Higher income countries were responsible for 98 per cent of all the tax loss countries around the world lost, whereas lower income countries were responsible for just 2 per cent.

Key recommendations

  • Excess profit tax. We’re calling on governments to introduce an excess profit tax on the large multinational corporations whose profits have soared during the pandemic while local businesses were forced into lockdown. For the digital tech giants who claim to have our best interests at heart but have been short-changing us out of billions in tax for years, this could be their redemption tax.
  • Wealth tax. Governments must introduce a wealth tax to reign in the billions in tax lost to tax havens every year. There has been an explosion in the asset values of the wealthiest since the pandemic began, even as unemployment has soared to record levels in many countries. A wealth tax would make sure that those with the broadest shoulders contribute as they should at this critical time.
  • UN tax convention. A global tax system that loses over $427 billion a year isn’t a broken system, it’s a system programmed to fail. It’s no surprise that the OECDs efforts to reform international tax rules have failed – OECD countries are responsible for nearly half of all global tax losses. We must establish a UN tax convention that makes sure robust international tax standards are set in a transparent and democratic way.