Tax avoidance and evasion increase economic inequality and distort economies, especially in low-income countries.
TJN has been a leading organising producing research into the scale and scope of the offshore economy.
Our 2017 Briefing Paper contains a collection of estimates, by TJN and by others, of the stock of wealth in offshore jurisdictions, and the scale of corporate and individual tax avoidance via tax havens.
Stock of wealth offshore
Estimates of the stock of wealth held offshore vary widely, not least because there is no agreed definition of what ‘offshore’ or ‘tax haven’ is, because of the secrecy involved, and because of weak official statistics. Estimates are relatively few.
- Our first major set of estimates was our ground-breaking and widely cited 2005 report ‘The Price of Offshore’, estimating $11.5 trillion in wealth in offshore tax havens.
- This was updated in 2012 in The Price of Offshore Revisited (POOR) which estimated, using broader data, that $21-32 trillion was stashed offshore. It, too, received global coverage.
- In 2016, Henry updated his estimates to $24-32 trillion.
- Gabriel Zucman and others have produced lower estimates – the equivalent of around 10 percent of world GDP held in tax havens – but we believe that these estimates are too low.
Multinational profit-shifting and annual offshore corporate tax losses
Our 2017 Briefing Paper outlines a range of estimates of multinational profit-shifting and consequent tax revenue losses, ranging from $500-650 billion a year globally. In more detail:
- The Missing Profits of Nations, Thomas R. Tørsløv, Ludvig S. Wier, Gabriel Zucman, April 2020. Multinationals shifted close to 40 percent of their profits to tax havens in 2017, and this shifting — approx. $600-650bn annually in 2015– reduced global corporate tax receipts by close to 10%. Also see their data portal.
- Measuring misalignment: the location of US multinationals’ economic activity versus the location of their profits, Cobham and Janský, 2018. Estimating $660 billion, 27% of US multinationals’ gross profit, misaligned.
- Global distribution of revenue loss from corporate tax avoidance: Re-estimation and country results, Cobham, A. and Janský, P. 2018. Revenues losses estimated at $500 billion annually, and a range of country estimates are provided also.
- Base erosion, profit shifting and developing countries, Crivelli, De Mooij, Keen, 2016, estimating global tax revenue losses at $650 billion annually.
- Big and ‘unprofitable’: How 10 per cent of multinational firms do 98 per cent of profit shifting. Ludvig Wier, Hayley Reynolds, UNU-WIDER Working paper, 2018.
- The effect of profit shifting on the corporate tax base in the United States and beyond, Kimberly A. Clausing, National Tax Journal, 2016. She found profit shifting costing the U.S. government $77 – $111 billion in corporate tax revenue by 2012, and these losses have risen substantially over time. Foreign affiliates of U.S. multinational firms booked $800 billion of income, or 75 percent of total foreign income, in low tax countries. The paper also looks at a number of other countries, with 25 mostly high-income countries losing some $280 billion a year to profit-shifting.
More research needed
Looking forward, we will continue to track the scale of tax injustice, with a series of openly published papers, starting in 2020, critically analysing the current state of knowledge of the leading global and national-level estimates of scale and tax losses due to tax havens, corporate and individual tax avoidance and evasion, and illicit financial flows.
We aim to set the path for further research to ensure more robust estimates with more specific implications for policy, with a particular focus on lower-income countries.
Alex Cobham is our director leading the scale of injustice programe.
You can contact Alex by emailing Alex [at] taxjustice.net