Corporate profit shifting via tax havens collectively costs governments between $500 and $600 billion a year in lost corporate tax revenue. In addition, $7 trillion of private wealth is hidden in offshore tax havens.
According to a report by Oxfam, ‘corporate tax dodging costs poor countries at least $100 billion every year. That is enough money to provide an education for 124 million children and prevent the deaths of almost eight million mothers, babies and children a year.’
There is now a global fight back.
The High-Level Panel on Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI) was launched 2 March.
It is an independent panel tasked with making recommendations to fix the global financial system, which allows trillions of dollars to be lost and hidden via tax evasion, tax avoidance, money laundering and corruption.
The 15-member panel was created by the President of the UN General Assembly and the President of the UN Economic and Social Council, and includes policymakers, academics, civil society workers and more.
Notable members include co-chair Dr Ibrahim Mayaki the former Prime Minister of Niger, Ms Heidemarie Wieczorek-Zeul the former German minister for development, and Mr Jose Antonio Ocampo, a professor at Columbia University, member of the board of governors of Banco de la República (central bank of Colombia) and the country’s former finance minister.
Dr Ibrahim Mayaki explained: “The money that is being hidden in offshore tax havens, laundered through shell companies and outright stolen from public coffers should be put toward ending poverty … the systems that governments use to address different types of financial corruption are fraying and do not effectively deal with the new ways that are used to game the system.”
He added: “In a world of cross-border trade, investment and finance often via digital platforms, there are limits to what countries can do on their own. Illicit finance is a global problem that requires global cooperation in order to achieve effective solutions.”
FACTI will look at what further action governments and financial institutions need to take in various areas, such financial and beneficial ownership transparency, tax matters, and bribery and corruption. The panel will meet at different points over the next year in regional consultations, with its work being supported by a New York-based secretariat. An interim report will be produced in July 2020, and a final report in February next year.
Ms Irene Ovonji-Odida, Ugandan lawyer and human rights activist, also on the panel, said in regard to the process FACTI plans to take: “once there is clarity about the patterns and the trends, that will give information that can lay the ground for specific recommendation on how to stop it.”
There has long been controversy over the definition of illicit financial flows. Although according to the OECD, since 2009, there have been no uncooperative tax havens as they all have committed to implement its standards of transparency, many OECD countries have still sought to limit illicit financial flows to a narrow framing of criminal finances, excluding the revenue pillaged from poorer countries through abusive but legally ambiguous tax practices.
The Tax Justice Network, an independent international network focused on research, analysis and advocacy in the area of international tax and financial regulation, including the role of tax havens, fights to repair the injustice of global tax systems.
The group welcomes the launch of this panel, with chief executive Alex Cobham saying: “The FACTI panel provides a powerful opportunity to address two major ‘tax gaps’ in the global architecture: first, the lack of representation at the OECD for lower-income countries that lose most to corporate and individual tax abuse; and second, the lack of a truly inclusive forum in which countries can set international tax rules.”
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