The State of Tax Justice 2021

Countries are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals – enough to fully vaccinate the global population against Covid-19 more than three times over. The 2021 edition of the State of Tax Justice documents how a small club of rich countries with de facto control over global tax rules is responsible for the majority of tax losses suffered by the rest of the world, with lower income countries hit the hardest by global tax abuse. The findings are further galvanising calls to move rule-making on international tax from the OECD to the UN.

Key findings

• Countries are losing $483 billion in tax a year to global tax abuse –  that’s enough to fully vaccinate the global population against Covid-19 more than three times over.
• Of the $483 billion lost a year, $312 billion of this tax loss is due to cross-border corporate tax abuse by multinational corporations and $171 billion is due to offshore tax abuse by wealthy individuals.
• Global tax abuse continues to hit lower income countries more severely than higher income countries. While higher income countries lose more tax in absolute number, their tax losses represent a smaller share of their revenues (9.7 per cent). Lower income countries in comparison collectively lose the equivalent of nearly half (48 per cent) of their public health budgets. The taxes that lower income countries lose would be enough to vaccinate 60 per cent of their populations, bridging the gap in vaccination rates between lower income and higher income countries

Key recommendations

• UN tax convention. Urgent calls to shift the responsibility of setting tax rules away from the OECD to the UN. The FACTI Panel’s key recommendations draw closely on the work of the tax justice movement, and include the establishment of a UN tax convention, intergovernmental UN forum for the urgent negotiation of further changes to the international tax rules; and a Centre for Monitoring Taxing Rights at the UN to raise national accountability for illicit financial flows and tax abuse suffered by others, and a globally inclusive.
• Excess profit tax. Governments must introduce an excess profit tax on multinational corporations making excess profits during the pandemic, such as global digital companies, in order to cut through profit shifting abuses. Multinational corporations’ excess profit would be identified at the global level, not the national level, to prevent corporations from underreporting their profits by shifting them into tax havens, and taxed using a unitary tax method.
• Wealth tax. Governments must introduction of a wealth tax to fund the Covid-19 response and address the long term inequalities the pandemic has exacerbated, with punitive rates for opaquely owned offshore assets and a commitment between governments to eliminate this opacity. The pandemic has already seen an explosion in the asset values of the wealthy, even as unemployment has soared to record levels in many countries.

Video: “The tip of the iceberg”