World’s worst corporate tax havens exposed
Oxfam report reveals dangerous race to the bottom on corporate tax

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2016-12-12

Bermuda, the Cayman Islands, the Netherlands are ranked top three among the world’s 15 worst corporate tax havens, according to new research published by Oxfam International today. The report ‘Tax Battles’, reveals how these tax havens are leading a global race to the bottom on corporate tax that is starving countries out of billions of dollars needed to tackle poverty and inequality. Oxfam calls for every government to stop the abuse of tax havens and ensure that companies pay their fair share.

Kalina Tsang, Head of Hong Kong, Macau, Taiwan Programme for Oxfam said, ‘Governments must stop multinational corporations’ abuse of tax havens where they transfer profits to places with little or no economic activity and offer low or zero rates of corporate tax. We urge the Hong Kong government to enhance tax transparency for the public, and to fully implement The Organisation for Economic Co-operation and Development (OECD)’s suggested actions on “Base Erosion and Profit Shifting” (BEPS) that are applicable to Hong Kong. This includes the restrictions for corporations to disclose the identity of beneficial holdings, to submit Country-by-country Reporting, and to increase penalties to restrict the abuse act of offshore tax havens.

‘To enhance transparency and management standards, Oxfam Hong Kong (OHK) has been advocating for the use of Environmental, Social and Governance (ESG) criteria among listed companies; this includes publishing data on tax compliance and detailed tax information. We hope to raise public awareness on corporate social responsibility (CSR) so that public will monitor corporations with us to create a world without poverty.’

The full list of the world’s worst tax havens, in order of significance are: (1) Bermuda (2) the Cayman Islands (3) the Netherlands (4) Switzerland (5) Singapore (6) Ireland (7) Luxembourg (8) Curaçao (9) Hong Kong (10) Cyprus (11) Bahamas (12) Jersey (13) Barbados, (14) Mauritius and (15) the British Virgin Islands.

Oxfam researchers compiled the ‘world’s worst’ list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency) [1].

Many of the countries on the ‘world’s worst’ list have been implicated in tax scandals. For example, Ireland hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. And the British Virgin Islands is home to more than half of the 200,000 offshore companies set up by Mossack Fonseca - the law firm at the heart of the Panama Papers scandal.

Esme Berkhout, tax policy advisor for Oxfam said, ‘Corporate tax havens are helping big businesses cheat countries out of billions of dollars every year. They are propping up a dangerously unequal economic system that is leaving millions of people with few opportunities for a better life. Ordinary people – particularly the poorest – are paying the price for this reckless competition through increases in personal taxes and cuts to essential services, such as healthcare and education.’

Tax dodging by multinational corporations costs poor countries at least US$100 billion every year, according to the calculation of United Nations. This is enough money to provide an education for the 124 million children who are not in school and fund healthcare interventions that could prevent the deaths of at least six million children every year [2].

Yet Oxfam’s report shows that tax havens are only part of the problem. Countries across the world are slashing corporate tax bills as they compete for investment. The average corporate tax rate across G20 countries was 40 per cent 25 years ago – today it is less than 30 per cent [3]. The use of unproductive and wasteful tax incentives is also ballooning – particularly in the developing world. For example, tax incentives cost Kenya US$1.1 billion a year – almost double their entire national health budget [4].

When corporate tax bills are cut, governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people. For example, a 0.8 per cent cut in corporate tax rates across OECD countries between 2007 and 2014 was partially offset by a 1.5 percent increase in the average standard VAT rate between 2008 and 2015 [5]. 

Notes to editors

A copy of the report, ‘Tax Battles: the dangerous race to the bottom on corporate tax,’ is available for download.

The methodology document, which outlines how Oxfam compiled the list of the world’s worst tax havens, is available for download.

[1] These criteria include:

• They grant fiscal advantages to non-resident individuals or legal entities only, without requiring that substantial economic activity be undertaken in the country or dependency.

• They provide a significantly lower effective level of taxation, including zero taxation for natural or legal persons.

• They have adopted laws or administrative practices that prevent the automatic exchange of information for tax purposes with other governments.

• They have adopted legislative, legal or administrative provisions that allow the non-disclosure of the corporate structure of legal entities (including trusts, charities, foundations, etc.), or the ownership of assets or rights.

[2] Tax dodging costs developing countries US$100 billion a year (http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf). Total annual domestic financing gap to achieve universal pre-primary, primary and secondary education in low and low middle income countries is US$39 billion per year (http://unesdoc.unesco.org/images/0023/002321/232197E.pdf). There are 124 million children out of school (http://www.uis.unesco.org/Education/Pages/oosc-data-release-2015.aspx). US$32 billion would fund the key healthcare to save the lives of 6 million children across the world each year (http://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(13)62231-X.pdf). 

[3] ‘G20 Corporation Tax Ranking’ Oxford University centre for business taxation’ http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Policy_Papers/g20-corporation-tax-ranking-2016_0.pdf 

[4] Corporate tax incentives are estimated to cost Kenya around US$1.1 billion per year or KShs 100 billion (http://www.taxjustice.net/cms/upload/pdf/kenya_report_full.pdf). Kenya’s health budget for 2015/16 was KShs 60 billion or US$591 million dollars (http://www.internationalbudget.org/wp-content/uploads/kenya-2016-budget-policy-statement-analysis.pdf).

[5] OECD (2015): http://www.oecd.org/newsroom/corporate-tax-revenues-falling-putting-higher-burdens-on-individuals.htm 

About Oxfam

Oxfam is a worldwide development organisation that mobilises the power of people against poverty. 

For media enquiries, please contact:

Maggie Chum
Communications Officer
Telephone: (852) 3120 5222 / (852) 6010 9961
Email: maggie.chum@oxfam.org.hk

Wong Shek-hung
Hong Kong Programme Manager
Telephone: (852) 3120 5279
Email: shwong@oxfam.org.hk