Developing countries denied badly needed cash for health and education, report shows
POOR countries such as Honduras could increase healthcare or education spending by 10-15 per cent but for shady tax fiddles operated by US transnational corporations.
Still Broken, a new report on the global tax system released yesterday by the Tax Justice Network, Oxfam, Global Alliance for Tax Justice and Public Services International, reveals that US transnationals routinely switch profits to offshore tax havens to reduce their tax bills.
G20 countries appear the biggest losers, but the heaviest impact is on the poorest states, including Honduras, the Philippines and Ecuador, because corporate tax revenues comprise a higher proportion of their national income.
The report estimates that US transnationals shifted $500-700 billion (£331-463bn) — a quarter of their annual profits — out of the US, Germany, Britain and elsewhere to other countries including the Netherlands, Luxembourg, Ireland, Switzerland and Bermuda in 2012.
In the same year, US companies reported $80 billion of profits in the British overseas territory Bermuda — more than their profits reported in Japan, China, Germany and France combined.
“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,” said Claire Godfrey, head of policy for Oxfam’s Even it Up Campaign.
“The heaviest costs are being felt in the poorest countries. Underfunded public services affect everyone the world over, but the vulnerable suffer most.”
Public Services International general secretary Rosa Pavanelli said: “Public anger will grow if the G20 leaders allow the world’s largest corporations to continue dodging billions in tax while inequality rises, austerity bites and public services are cut.”
G20 heads of state will consider measures they claim will address corporate tax avoidance at their annual meeting next week in Turkey.
Global Alliance for Tax Justice chairman Dereje Alemayehu 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.”