10 NOV 2015
G20 countries lose most money from corporate tax dodging, but poor countries hardest hit
G20 countries are the biggest losers when US multinationals avoid paying taxes where they do business. This is the main finding of a new report on the global tax system, ‘Still Broken,’ released by the Tax Justice Network, Oxfam, Global Alliance for Tax Justice and Public Services International today.
Overall it is estimated that, in order to reduce their tax bills, US multinationals shifted between US$500 and US$700 billion – a quarter of their annual profits – out of the United States, Germany, the United Kingdom and elsewhere to a handful of countries including the Netherlands, Luxembourg, Ireland, Switzerland and Bermuda in 2012. In the same year, US multinational companies reported US$80 billion of profits in Bermuda – more than their profits reported in Japan, China, Germany and France combined.
Claire Godfrey, head of policy for Oxfam’s Even it Up Campaign said, ‘Rich and poor countries alike are haemorrhaging money because multinational companies are not required to pay their fair share of taxes where they make their money. Ultimately the cost is being borne by ordinary people – particularly the poorest who rely on public services and who are suffering because of budget cuts.’
The G20 Heads of State are expected to consider a package of measures they claim will address corporate tax avoidance at their annual meeting in Turkey on 15 and 16 November.
Alex Cobham, Director of Research at Tax Justice Network, said, ‘The corporate tax measures being adopted by the G20 this week are not enough. They will not stop the race to the bottom in corporate taxation, and they will not provide the transparency that’s needed to hold companies and tax authorities accountable. It’s in the G20’s own interest to support deeper reforms to the global tax system.’
The Tax Justice Network, Oxfam, Global Alliance for Tax Justice and Public Services International are calling on the G20 to support further reforms to the global tax system that involve all countries on an equal footing. These reforms should effectively tackle harmful tax practices such as profit shifting and the use of corporate tax havens and should halt the race to the bottom in general corporate tax rates.
While G20 countries lose the largest amount of money, low income developing countries such as Honduras, the Philippines and Ecuador are hardest hit because corporate tax revenues comprise a higher proportion of their national income. It is estimated, for example, that Honduras could increase healthcare or education spending by 10-15 percent if the practice of profit shifting by US multinationals was stopped.
Dereje Alemayehu, chair of the Global Alliance for Tax Justice said, ‘If big G20 economies with well-developed tax legislation and well-resourced tax authorities cannot put a stop to corporate tax abuse, what hope have poor countries with weaker, less well-resourced tax administrations? Poor countries need a seat at the table in negotiations on future tax reforms to ensure that they can claim tax revenues which are desperately needed to tackle poverty and inequality.’
Notes to editors
The full research paper on which the briefing is based: ‘Measuring misalignment: The location of US multinationals’ economic activity versus the location of their profits’, written by Alex Cobham and Petr Janský of Tax Justice Network. A breakdown comparing the proportion of profits which US multinationals declare in different countries with their economic activity is included in the annex of this report.
The research focuses on US based multinationals because only the US publishes such detailed data from a comprehensive survey of its multinationals. If multinationals from other countries are factored in revenue losses would be far greater.
Oxfam is a worldwide development organisation that mobilises the power of people against poverty.
The Global Alliance for Tax Justice brings together thousands of organisations worldwide through regional networks in Asia, Africa, Latin America, North America and Europe. The Global Alliance for Tax Justice campaigns for a world where fair and accountable taxation funds sustainable development and accessible public services for all. www.GlobalTaxJustice.org
Public Services International is a global trade union federation representing 20 million working women and men who deliver vital public services in 150 countries. Public Services International champions human rights, advocates for social justice and promotes universal access to quality public services. Public Services International works with the United Nations system and in partnership with labour, civil society and other organisations.www.world-psi.org
The Tax Justice Network is an independent international network dedicated to high-level research, analysis and advocacy on the role of tax and the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens.