It is no secret that there is a great deal of controversy regarding companies and individuals avoiding paying taxes. Now that 2021 is over, the State of Tax Justice report sheds light on the impact of tax avoidance last year.
The report in question is the State of Tax Justice 2021. The Global Alliance for Tax Justice, the Tax Justice Network, and Public Services International publish it jointly. The last of these is a global union federation.
$483 Billion Lost
According to the report, tax agencies lost an estimated $483 billion in 2021 from tax avoidance. For reference, the figure for 2020 was $427 billion.
How the Data Was Calculated
The team behind the report used self-reported data from multinational corporations. They also used government-collected banking data.
However, data scientists who worked on the project say that these figures are far from accurate. Miroslav Palansky from TJN called it “the tip of the iceberg.”
How the $483 Billion Was Divided
The report doesn’t just provide an overall figure of $483 billion for tax loss. It also breaks it down in various ways to help show the impact of tax avoidance.
To start, $312 billion of the tax loss was from multinational companies that abused cross-border corporate tax laws. The remaining $171 billion was from wealthy people who used offshore tax havens to evade taxes.
The report estimates that nearly 40% of the total tax abuse occurred within the UK. According to the report, there is a network featuring the City of London and British overseas territories. Moreover, 78% of the global losses from taxes appear to be the fault of rich countries.
The report also puts the tax losses in poor countries into perspective. It estimates that it would have been enough to vaccinate 60% of those countries’ populations. That would have been enough to eliminate the gap in vaccination rates based on country wealth.
The Report’s Predictions
The OECD recently brokered a 15% minimum global tax rate for businesses, with nearly 140 nations agreeing. However, those behind the State of Tax Justice 2021 report say that this is not enough.
The report estimates that this change will only manage to recover a small fraction of the tax losses. Additionally, most of the recovered taxes are likely to go to the richer countries instead of the poorer ones. This is the case despite the fact that those poorer countries are typically where the taxes should have been paid.
The report calls for massive tax reform, including holding countries accountable.
The State of Tax Justice 2021 report lets us reflect on tax losses from 2021. Globally, countries lost around $483 billion from tax avoidance. This would have been enough to significantly impact poor countries, although rich countries facilitated the vast majority of the avoidance. The report urges major tax reforms as well, stating that the new 15% minimum corporate tax rate agreed upon by 140 countries is not enough. Time will tell if the report leads to any changes.
Did you find this article useful?
Subscribe to our newsletter for more!