Corporate Tax

Rich nations that set world tax guidelines are reportedly the most important contributor to corporate tax abuse

Indeed, the world’s richest countries that help set global tax standards are responsible for the majority of corporate tax abuses around the world, according to a new report.

The Tax Justice Network’s Corporate Tax Haven Index 2021, which rates the countries as “Most Complicated in Helping Multinational Corporations Pay Less Taxes Than Expected,” includes six jurisdictions that are part of the Organization for Economic Cooperation and Development – the British Virgin Islands, Cayman Islands, Bermuda, the Netherlands, Switzerland and Luxembourg – as the world’s biggest factors in corporate tax avoidance.

The OECD, an organization made up of high-income countries, collects economic data and uses it to make recommendations on regulatory reforms, corporate governance and tax policy – not just for its members, but for the whole world.

“With today’s index results, trusting the OECD is like trusting a pack of wolves to build a fence around your hen house,” said Dereje Alemayehu, executive coordinator of the Global Alliance for Tax Justice, in a statement released by TJN on Tuesday.

TJN’s analysis of the 2020 Tax Equity State found that countries lose $ 245 billion in tax revenue annually to cross-border tax avoidance by multinational corporations. The new report attributes 68% of that number to OECD members and their overseas territories.

TJN also found the UAE climbed to 10th place in its rankings, in large part due to over $ 200 billion in foreign direct investment, representing more than 50% of the country’s GDP and is directed through the Netherlands.

“The world’s richest countries are removing $ 166 billion in corporate income tax from the rest of the world each year by allowing the largest multinationals to pay less tax than they should,” said Liz Nelson, director of tax justice and Human rights at TJN a statement.

According to the report, one problem is that the OECD’s own assessment methods are too lax. While the OECD recently published its own report on “professional enablers” helping to ease the potential financial crimes of their clients, TJN’s analysis suggests that 98% of the risks of corporate tax abuse come from countries where the OECD has determined that they do not allow harmful tax practices.

“To get approval from its most powerful member states, the OECD had to dilute its global tax rules to the point of obsolescence,” said Moran Harari, TJN’s chief index researcher, in a statement. “Instead of eliminating tax havens, the OECD’s global rules have normalized them. Only a UN tax convention, in which global rules are determined by democracy and not by plutocracy, can make tax havens a thing of the past. “

TJN suggests moving responsibility for corporate tax standards from the OECD to the United Nations. This recommendation follows the report of the United Nations High-Level Panel on International Financial Responsibility, Transparency and Integrity, which contains over a dozen recommendations to combat tax abuse. Strategies proposed by FACTI include minimum corporate tax thresholds, increased ownership transparency, and increased protection for whistleblowers and journalists.

Alex Cobham, executive director of TJN, said the way tax systems prioritize the wants of businesses and wealthy people over the needs of everyone else “has been made painfully clear by the pandemic,” stressing the importance of that Understand the true cost of tax avoidance.

“Our tax systems are our most powerful tools in creating a just society that gives equal weight to the needs of all members of society,” Cobham said in a press release. “We need to reprogram our global tax system to prioritize the well-being and livelihood of people over the desires of those who do not want to pay their taxes.”

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