Multinational tax evasion is entrenching poverty and weakening developing country economies, international agency Oxfam has warned ahead of the G20 leaders meeting in Russia to chart a plan for boosting global economic growth.
Developing countries lose an estimated $100bn to $160bn annually to corporate tax dodging[i]. Oxfam is urging the G20 to agree a rewrite of international tax laws at their 5-6 September summit in St Petersburg.
In July, G20 finance ministers approved a plan to clamp down on tax evasion by multinational corporates. So far, poorer countries outside of the G20 – who are particularly affected by corporate tax avoidance – have not been invited to participate in negotiations on new tax rules.
“While President Obama meets with other G20 leaders to craft a plan to boost global economic jobs & growth, international tax evaders are sucking hundreds of billions of dollars from poor countries,” said Gawain Kripke, director of policy and research for Oxfam America. The world’s poorest countries can ill afford losing billions that could be spent on tackling poverty and boosting their economies. Now the G20 must finish the job without delay, and treat developing countries as equal partners in efforts to stop tax dodging.”
For every $1 billion draining out of developing countries via commercial tax evasion:
- The annual salaries of 400,000 midwives in sub-Saharan Africa - where maternal mortality rates are the highest in the world - could be paid[ii].
- 200 million mosquito nets to fight malaria could be purchased. In Africa, a child dies every minute of this preventable and curable disease[iii].
G20 leaders have acknowledged that for prosperity to be sustained it must be shared more equally. Income inequalities are growing in most G20 countries, dampening economic growth and undermining social cohesion and political stability.
“Tax evasion robs poor countries of the resources they need to create jobs and contribute to the global economy,” said Kripke. “The world needs growth strategies that are balanced and inclusive, and to achieve this, the G20 crack down on international tax cheats.”
Oxfam is calling on the G20 to:
- Clamp down on tax evasion and corruption draining poor country economies, and give poor countries a real voice in tax negotiations
- Ensure that growth is fair and boosts equality, so that its benefits reach people living in poverty. As a first step G20 countries should make inequality reduction a measure of progress alongside GDP growth.
- Invest in high-quality public health and education services. These are crucial safety nets for the poorest and those falling on hard times, as well as crucial investments in future productivity and a fairer society.
“Economic growth alone won’t be enough to prevent poverty escalating across G20 countries and beyond,” said Kripke. “The G20 must tackle the challenges of inequality to generate strong, sustainable, balanced and inclusive growth.
[i] Global Financial Integrity estimates that developing countries lose $100bn annually from trade mispricing alone. This occurs when goods leave a country of export under one invoice, the invoice is redirected to another jurisdiction such as a tax haven where the price is altered, and then the revised invoice is sent to the importing country for clearing and payment purposes. http://www.gfintegrity.org/storage/gfip/documents/reports/implied%20tax%20revenue%20loss%20report_final.pdf
Christian Aid estimates that trade mispricing and false invoicing costs developing countries $160 billion a year. http://www.christianaid.org.uk/images/deathandtaxes.pdf
[ii] The average annual salary of a nurse or midwife in Sub-Saharan Africa is $2500.