It is time for world to stop the super-rich from dodging taxes
By Alvin Mosioma | November 16th 2021
“In this world, nothing can be said to be certain, except death and taxes”—or so it is said. Well, that rather depends on who you are. There are many ways for the super-rich to avoid paying their taxes as confirmed once again by last month’s release of the Pandora Papers.
Worldwide, an estimated $483 billion is lost to tax havens each year; an amount that would cover the cost of fully vaccinating the global population more than three times over (including two doses and delivery costs). These staggering numbers are presented in the 2021 State of Tax Justice report released today by the Global Alliance for Tax Justice, Public Services International and the Tax Justice Network.
The State of Tax Justice report demonstrates how low-income countries lose a larger share of their taxable income to tax evasion and aggressive avoidance than is the case for rich countries.
The 2021 State of Tax Justice report puts forward three recommendations for repairing global financial inequalities. The first calls for a pandemic excess profits tax on mega-corporations like Amazon and Starbucks, which have directly benefited from the lockdown of their smaller competitors. This has worked in the past. During and after WWII, various nations imposed excess profit taxes on the industrial giants who made fortunes during wartime, levying taxes of 90 per cent or higher on profits in excess of average peacetime revenue.
The second recommendation is for governments to introduce wealth taxes. In most countries, taxes on labour are significantly greater than those placed on ownership. This means that the owner (and stockholders) of a tulip farm, for example, pays a significantly lower rate on their income than the men and women who labour for them.
By taxing their highest earners, governments will finally ensure that the wealthy pay their fair share for public services such as roads, schools and electricity that are essential for their success.
The final recommendation is for the establishment of an intergovernmental tax body at the United Nations. This is by far the most ambitious proposal and would have the greatest long-term impact on cross-border tax abuse. Such a body would, for example, oversee the implementation of a minimum global corporate tax rate—thereby ending the current “race to the bottom,” where governments seek to attract foreign businesses by offering low or no corporate tax rates, inadvertently depriving citizens of much needed tax revenue.
Last month, 136 countries agreed to a global tax reform plan that included a 15 per cent global corporate tax rate. Kenya is one of 23 African nations that have refused to sign onto the plan. Designed by the OECD, the agreement was quickly deemed a “deal of the wealthy” due to its lack of ambition and failure to institute the safeguards necessary to create true, lasting change.
This might be explained by the fact, as explained in the State of Tax Justice report, that OECD member countries and their dependent territories are responsible for over 78 per cent of revenue losses to abusive international tax practices.
Establishing an intergovernmental tax body at the UN would finally require rich countries to engage with poorer nations on international taxation as equals. Previously, lower income countries, especially their public sectors, were considered epicentres of financial corruption as opposed to the private sectors of high income countries where such malfeasance is made possible.
In her introduction to the 2021 State of Tax Justice report, Winnie Byanyima, Executive Director of UNAIDS and Under-Secretary-General of the UN, writes “As the Covid crisis has reminded the world, tax justice is essential for our health. To overcome Aids, overcome Covid-19, and ensure health for all, countries need to secure revenue, generated progressively. When unfair rules and practices prevent them from doing so, as they do right now, the consequences include preventable deaths and a dangerous failure to beat pandemics.” I couldn’t agree more.
Governments must act urgently and decisively on the recommendations set out above to crack down on tax havens, money laundering and other practices that drain countries of much-needed revenue. With the world in the grip of a pandemic, we can’t afford for them not to. Let’s make taxes a certainty for the mega-rich, and Covid-19 less of a threat to us all.
Mr Mosioma is the Executive Director, Tax Justice Network-Africa
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