Tax Havens Cost Countries Nearly $500B In Annual Revenues

Governments around the world are losing nearly $500 billion in tax revenue per year to global tax abuse, according to a new State of Tax Justice 2021 report, Sean McGoey reported recently for the International Consortium of Investigative Journalists (ICIJ).

Photo Insert: The Pandora Papers highlighted once again, the failure of international rules for taxing multinational companies and offshore income and wealth.

The report, published by the Tax Justice Network (TJN), the Global Alliance for Tax Justice, and the global union federation Public Services International — found that countries miss out on $312 billion annually due to tax abuse by multinational corporations and an additional $171 billion via individual tax evasion.

TJN data scientist Miroslav Palanský said in a release that those numbers, which represent direct losses by governments, are likely only “the tip of the iceberg.”

The International Monetary Fund (IMF) has estimated that the race to the bottom among tax havens has caused additional indirect losses by driving global tax rates down, and the indirect impact of tax abuse by multinational corporations is at least three times larger than the direct losses, according to the report.

Amid the ongoing COVID-19 pandemic, the report frames the scope of tax avoidance — and the disparate impact on lower-income countries — through the lens of public health.

Using data on the cost of delivering vaccinations, TJN estimates that the $483 billion in global tax losses would be enough to vaccinate the entire world three times.

And while lower-income countries lose far less in tax revenue — $40 billion — than wealthier nations, that figure represents nearly half of those countries’ public health budgets.

“The parallels with global tax injustice are striking,” the report says. “As the Pandora Papers highlighted once again, the failure of international rules for taxing multinational companies and offshore income and wealth plays out in predictable ways.”

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