FINANCIAL SECRECY
- December 7, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
No Comments
Subject: Economy
Context: Global tax rules must be rewritten to bring in more transparency and make tax revenues available for development.
Concept:
- A report was jointly launched by Tax Justice Network, Public Services International and the Global Alliance for Tax Justice.
- Called “State of Tax Justice 2020” that tells us how much each country in the world loses to corporate and private tax abuses. It also indicates the extent of the impact these losses have on each country’s health spending.
- Countries around the world are on average losing the equivalent of 9.2 per cent of their health budgets to tax havens every year. While this tax shortfall represents 8.4 per cent of health budgets for higher-income countries, the proportion jumps to 52.4 per cent in lower-income countries.
Losing to Tax Havens:
- Of the $427 billion, nearly $245 billion is lost to multinational corporations shifting profit into tax havens.
- This works on a very simple principle: multinationals only pay taxes in the subsidiaries where they declare their profits (profit shifting).
- To do that, they only have to show low profits or deficits where taxes are relatively high (even if it is in those countries that they undertake the bulk of their activities) while reporting high profits in jurisdictions where taxes are very low, or even zero — even if they have only parked trademarks and rented mailboxes there.
- Different tax rates and bilateral tax treaties mean that multinationals do a lot of profit shifting to advanced countries like Ireland, the Netherlands, the Channel Islands in the UK and some US states, to reduce and sometimes even eliminate their tax burdens, even when their total profits are increasing.
- Multinational companies must be made to report country-by-country data on sales, costs and profits and to publish these.
- The continuing failure to do so means that the public is blocked from seeing the information that corporations, accountants and governments already have where multinational corporations are shifting their profits to.