Dear friends, dear interested,
Today the Tax Justice Network published its “State of Tax Justice 2020” report on the extent of global tax avoidance by large corporations and tax evasion by individuals. It is the first study to paint an overall picture of global tax avoidance and evasion both by wealthy individuals and multinational enterprises. Based on aggregated data from the OECD, the report reveals precisely which countries are responsible for the lost tax revenues of others. After almost two decades of persuasion by the Tax Justice Network, the OECD finally published the tax data of multinational companies per country in July this year, making this groundbreaking study possible in the first place. However, the team had to derive the data for Germany from the information provided by other countries because Germany had refused to make its data public, no better than the UK.
Using data from the OECD, the authors were able to calculate that governments worldwide lose 360 billion euros in direct tax revenue annually because it is still possible to shift corporate profits and private assets to tax havens. If indirect losses due to tax avoidance by multinational companies are included, the annual tax losses amount to an estimated 978 billion euros. This figure is based on estimates by researchers at the International Monetary Fund who report that indirect losses are at least three times as high as direct corporate tax losses. The report also provides an overview of country rankings on three different indicators: One on the attractiveness of countries as corporate tax havens, the second on financial secrets scores per country and the third on a country’s vulnerability to illicit financial flows. I can only recommend reading this report!
For Germany, the network has calculated an annual loss of direct tax revenue of 29,520.478.758 billion euros. That is equal to 361€ per inhabitant per year! This puts Germany in third place among the biggest tax losers, just behind the USA and the UK. The German government should actually have a great interest in changing this. If the estimated indirect losses are taken into account, the tax revenue lost annually could amount to more than 90 billion euros. This is money we need for investment in climate action, health, education and infrastructure for the future. Proposals for effective tax legislation in Europe already exist, and we could launch them this year – we just need the political will to do so.
Of particular relevance to the fight against tax avoidance in Europe is the list of the five jurisdictions responsible for most of the tax losses from other countries: First is the British Cayman Islands with 16.5% of all tax losses worldwide, followed by the UK with 10%, the Netherlands (8.5%), Luxembourg (6.5%) and the US (5.5%). In total, European member states are responsible for 36% of all tax losses. This means that we must not only focus on tax avoidance in third countries but must start here in Europe, with binding transparency rules for large companies. On the other hand, Great Britain, with its overseas territories and crown dependencies, is a so-called “spider’s web of tax havens”, responsible for 37.4% of all tax losses worldwide. This must change. We Greens will keep this figure in mind when shaping the UK’s future relations with the EU.
Tax justice is also about global justice: the study by the Tax Justice Network shows that poorer countries are hit much harder by lost tax revenues than richer ones: Even if rich countries suffer much higher tax losses overall, these losses are significantly lower in relation to the public budget than in poorer countries. In Germany, for example, lost tax revenues correspond to 11.26 percent of health care spending. On the African continent, tax losses correspond on average to 52.5 percent of countries’ health care spending – in Latin America, the average is 20.4 percent. And rich countries, including European ones, are responsible for these high losses. In this way we are undermining our own development policy objectives.
Yesterday, I reported how the German government repeatedly prevented an agreement on more tax transparency for large companies by simply not putting the issue on the agenda of the Council. With the lost (direct!) tax revenues of one year we could pay the annual salaries of 640 975 nurses* in Germany, as the Tax Justice Network has calculated. But there is still the possibility to go one step further this year, in the Committee of Permanent Representatives under the German Council Presidency. After this report of the Tax Justice Network, the fact that we need to act should be self-evident.
Tax transparency must, however, start even earlier, namely with the disclosure of tax data by the member states. The Tax Justice Network study is based on aggregated figures from the OECD, which means that the tax avoidance cannot be traced back to individual companies. Yet, Germany has refused to disclose its figures even in aggregated form. Only in the future will Germany publish corporate tax data by country, at least on an aggregated level. Germany thus not only hinders effective legislation for more tax justice on a European level but also important research on global tax avoidance. Tax justice is in the public interest and the public has a right to access this information. In contrast to Germany, France, Italy, the Netherlands, Luxembourg and the USA have all disclosed their aggregated figures. This is a disappointing result of the German government in terms of tax transparency.
I will not stop until we have, as a first step, obliged large companies to disclose their profits per country – and the taxes paid on them. And then it’s time for the second step: a minimum tax rate for corporations!
With determined European greetings,
Sven Giegold
The Study by the Tax Justice Network can be found here: https://taxjustice.net/reports/the-state-of-tax-justice-2020/