A range of perspectives

Tax Justice Factsheet

• In 2015 the Irish government collected €60 billion in tax receipts. 
• It is estimated that societies lose $500 billion each year through corporate tax avoidance. Of this, $200 billion is lost by developing countries because companies don’t pay as much tax as they should. 
• This is more money than they receive in overseas aid. (The cost of achieving the Sustainable Development Goals by 2030 is estimated at $1.4 trillion per year.
• Over 80% of international trade takes place between different branches of the same company (for example, between Microsoft in the USA and Microsoft in Ireland). It is possible in this situation for companies to exaggerate their costs and reduce their profits in higher-tax jurisdictions, and use trade between their own companies to move profits to countries where they pay little or no tax. This is called ‘transfer-mispricing’. 
• Major accountancy firms help design tax minimisation schemes for companies. One of the biggest accountancy firms, KPMG, were fined $456 million in the USA for “designing, marketing and implementing illegal tax shelters”.
• Companies and wealthy individuals often place their money in tax havens. Tax havens include countries like Switzerland, Bermuda and the Cayman Islands. They allow people to open bank accounts even if they do not live in the country or do any business there. The details of the bank accounts are kept secret, and little or no tax is charged.
• In 2015 it was estimated that $7.6 trillion – or roughly 8% of the world’s GDP in 2014 – was hidden in tax havens. The Tax Justice Network has highlighted that this might even be a conservative  estimate.
• Tax dodging would be much more difficult if multinational companies had to file accounts showing how much tax they paid and how much profit they earned in each country and their profits were taxed in line with this (unitary taxation).
• The problems caused by tax havens could also be minimised if every country agreed to supply information to other states about bank accounts held by their citizens – that way, it would become clear if people or companies were using foreign bank accounts to avoid paying tax in the country where they made their money. This is called country-by-country-reporting.
• Globally corporate tax rates have been declining over the last 3 decades. In 1980 the average corporate tax rate was above 40 per cent; in 2015 it dropped to less than 25 per cent. If the current trend continues, the global average corporate tax rate will hit zero per cent in 2052.
• While corporations are paying less, consumers around the world are being asked to pay more, reflecting the fact that someone has to fill the gap from the missing corporate tax income. Since consumer taxes disproportionately affect the poorest in society, this trend has the concerning consequence that tax systems are becoming more regressive, and risk exacerbating inequality rather than reducing it. 

Large Accountancy Firm 

“A  worrying  tendency  seems  to  have  emerged  among  external  stakeholders  to  make ‘moral’  judgments  about  tax  planning  and  to  expect  companies  to  manage  their  tax  affairs in  a  ‘moral’  way”. A representative  of  a  large  accountancy  firm  writing  in  a  financial  magazine.

Southern  Government 

“One  of  the  most  pressing  issues  facing  our  continent  is  to  embark  on  a  path  to  free  African countries  from  their  dependence  on  foreign  assistance  and  indebtedness.  An  indispensable condition  of  this  is  the  strengthening  of  our  capacity  to  mobilise  domestic  resources.” 

African  Tax  Administrators’  Forum  (a  forum  of  African  civil  servants),  Pretoria,  2008

Southern  Government

“Businesses  deliberately  blur  the  line  between  their  country  of  origin  and  the  countries  they operate  within,  in  order  to  avoid  paying  tax.” 

Darmin  Nasution,  Indonesia’s  Director  General  of  Taxation,  2009

Northern  Government

“We  will  set  out  new  measures  to  crack  down  on  the  tax  havens  that  siphon  off  money from  developing  countries  –  money  that  could  otherwise  be  spent  on  bednets, vaccinations,  economic  development  and  jobs.” Gordon  Brown,  UK  Prime  Minister,  2009

Tax  Justice  Network  

“We  support  a  level  playing  field  on  tax  and  we  oppose  loopholes  and  distortions  in  tax  and regulation,  and  the  abuses  that  flow  from  them.  We  promote  tax  compliance  and  we  oppose tax  evasion,  tax  avoidance,  and  all  the  mechanisms  that  enable  owners  and  controllers  of wealth  to  escape  their  responsibilities  to  the  societies  on  which  they  and  their  wealth  depend. Tax  havens,  or  secrecy  jurisdictions  as  we  prefer  to  call  them,  lie  at  the  centre  of  our concerns,  and  we  oppose  them”. 

Christian  Aid,  Anti-Poverty Group

“Without  facilitators  in  the  developed  world,  those  seeking  to  avoid  paying  their  dues  in  the developing  world  would  be  unable  to  operate.  But  there  are  plenty  of  people  willing  to  help: well-paid  lawyers  and  accountants  designing  aggressive  tax-avoidance  strategies;  bankers;  and the  administrators  of  tax  havens  where  the  proceeds  can  be  hidden  in  complex  offshore structures  of  trusts  and  front  companies. The  main  techniques  of  evading  tax  are  well  known but  hard  to  prove”. 

Southern perspective

“Taxation is key to increasing our legitimacy and ability to make our own decisions.” Mary Baine, Commissioner General, Rwanda Revenue Service, 2009 

G8
“We  cannot  continue  to  tolerate  large  amounts  of  capital  hidden  to  evade  taxation.” G8  Summit  Declaration,  2009

Paschal Donohue, Ireland’s Finance Minister, 2021

“I do believe that smaller countries need to be able to use tax planning as a legitimate instrument to compensate for what they do not have.”

David McWilliams, Economist, 2021 in the Irish Times

In the late 1980s, Ireland was thwarted by a lack of capital. When you have no capital of your own, you must import it and you do this by making capital cheap. How do you make the deployment of capital cheaper in your country? You tax it less.

David McWilliams, Economist, 2021 in the Irish Times
Tax is an entirely legitimate weapon in a sovereign country’s economic arsenal. It will always be the case. As we begin to frame a discussion about the role of multinational companies here, it would be wise to take stock and – honestly and without rancour – appreciate the vital part that foreign companies, attracted by our tax system among other things, have played in our country’s transformation.

Janet Yellen, Head of US Treasury
“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids, it is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.

Afrodad, Tax Justice Africa & Alternative Information and Development Centre Africa
Pillar One’s taxation of multinationals in market countries’ (where sales are made) has been subject to concession after concession. It has been watered down to the point that only a handful of companies would be eligible for a tax which would only apply to a small portion of their profits. In addition, Pillar Two’s global minimum tax rate of 15% is absurd given the ongoing global economic, health, and climate crisis – during which many multinationals have only grown their wealth…Under the G7’s proposal, the tax revenue accruing under Pillar Two’s global minimum tax rate would be allocated to the countries in which multinationals are headquartered. Conveniently, these tend to be the finance capitals of the Global North which constitute most of the G7. The developing countries from which these profits are often extracted in the first place, and which are the most in need of fiscal resources to finance development and public services, are left by the wayside.