The document discusses how tax havens cost countries billions each year in lost tax revenue. It estimates the global losses at $427 billion annually, which corresponds to 9.2% of health budgets for countries on average. This lost revenue could pay for 34 million nurses salaries globally. Lower income countries lose an even higher percentage, with India losing over 40% of its health budget to tax havens. The document argues that overhauling tax systems and increasing transparency is critical to addressing issues like funding for healthcare, especially during the Covid-19 pandemic. It maintains that secrecy allows corporations and wealthy individuals to avoid taxes by shifting profits and assets to tax havens.

2. PESTEL -POLITICAL GROUP
Leel Aswathy Asok
Batch C

3. Jayati Ghosh | Updated on December 06, 2020 Published on December 06,
2020
Fighting financial
secrecy is a way to
fight Covid

4. Global tax rules must be rewritten
to bring in more transparency and
make tax revenues available for
development

5. If most states in the world are unable to cope with the Covid-19 pandemic today, it is also
because of the persistence of tax havens. By stealing hundreds of billions of dollars from
countries around the world every year, these tax havens make it difficult for governments to
fund hospitals, school systems, or programs against inequality. More ambitious efforts like
reaching the UN Sustainable Development Goals are nearly impossible.
Unfortunately, the pandemic is probably only the first of a series of larger crises awaiting us,
driven by the growing climate emergency. It is appalling to realise that in such a situation, the
world is losing over $427 billion in tax each year to international tax abuse. This is what
emerges from a report that has just been jointly launched by Tax Justice Network, Public
Services International and the Global Alliance for Tax Justice.
Called “State of Tax Justice 2020”, it 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.

6. Losing to tax havens

7. Countries around the world are on average losing the equivalent of 9.2 per cent of their health
budgets to tax havens every year, which would allow them to pay for 34 million nurses’ salaries.
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.
The US itself loses about $90 billion a year. This corresponds to 5.82 per cent of its health care
budget and would cover the salaries of 1.15 million nurses. In comparison, India loses less in
absolute terms ($10.3 billion), but this loss represents 44.7 per cent of the country's health
budget and would pay the annual salary of 4.2 million nurses.
The irony is that a good part of these funds are disappearing legally. 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. 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.

8. ● 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.
This prevents meaningful accountability of both multinational corporations and tax
authorities — whether from States that procure profit shifting from elsewhere, or those
that suffer from it.

9. ● Of the $427 billion that find their way to tax havens each year, $182 billion is
lost to wealthy individuals who are able to hide undeclared assets and
incomes offshore because of a lack of international transparency. There is
some limited progress towards automatic exchange of information between
countries on the financial accounts of residents, to limit banking secrecy. But
without a requirement of having comprehensive public registers of the
beneficial owners of companies, trusts and foundations, tax evasion will
remain a systematic practice.

10. ● For both corporates and private individuals, the common denominator of tax
abuse is secrecy. The rules and policies on which our global tax system runs
can and must be rewritten to make profit shifting obsolete, which requires
strong international cooperation. This also means bringing transparency to
the huge private fortunes held offshore, which are currently only exposed by
efforts of journalists, whistleblowers and civil society organisations.
● The coronavirus pandemic has exposed the grave costs of an international
tax system serving the interests of the rich and the powerful. Now more than
ever, governments must overhaul their tax systems to prioritise people’s well-
being.

11. ● The writer is a Senior Researcher at the Political Economy Research Institute
at University of Massachusetts.