The #ParadisePapers revealed a stunning amount of examples of international tax dodging – both by multinational corporations and private individuals. But where are we at – one year after the scandal?
Tax avoidance by multinational corporations
In summary, the international system for taxing multinational corporations is unchanged since the 2017 #ParadisePapers scandal.
In 2015, the OECD and G20 agreed a package of measures to combat corporate tax avoidance (the so-called Base Erosion and Profit Shifting (BEPS) package). But unfortunately, this package failed to solve the problem, and while some loopholes were been closed, others were opened up.[i]Therefore, we don’t have the necessary international standards to solve the problem of corproate tax dodging. Despite the #ParadisePapers, no major new international measures have been taken.
The #ParadisePapers clearly illustrated that multinational corporations adjust their tax strategies to changes in the tax standards, and continue to avoid paying their share of tax (see for example the #ParadisePaper stories on Nikeand Apple). This is made possible by the fact that governments around the world continue to offer harmful tax incentives, unjust tax treaties and secret transfer pricing deals with corporations, all of which undermines international tax justice.
The problem if further exaccerbated by the digitalisation of the economy, which is affecting all sectors, and has opened up new gateways for multinationals to avoid tax.
Meanwhile, corporate transparency remains at very low levels, and citizens are, for example, not allowed to know how much tax multinational corporations pay on a country by country basis.
Tax evasion by private individuals
As regards wealthy individuals who use international structures and tax havens to conceal wealth and dodge taxes, some important progress has been made since the #ParadisePapers. The European Union has decided to introduce public registers of the real (‘beneficial’) owners of companies in the EU. This is an important step forward in the fight to stop shell companies from being used to hide money. But more remains to be done – there are still many countries around the world that provide tax dodgers opportunities to hide their money. The international system for sharing information between tax administrations also still leaves room for improvement – in particular for the world’s poorest countries, which find it very hard to access the information they need to prevent international tax evasion by citizens from their countries.
Global Alliance for Tax Justice members and partner organisations around the world are planning the Global Days of Action to call on our governments to revitalise the efforts to make multinational corporations pay their share, and ensure funds raised through progressive tax policies are spent on ensuring quality public services for all.
[i]The latest review of the international standards for taxing multinational corporations was know as the Base Erosion and Profit Shifting (BEPS) process. For more information on the shortcomings of the BEPS process see, for example, BEPS Monitoring Group, ‘Overall Evaluation of the G20/OECD Base Erosion and Profit Shifting (BEPS) Project’, October 2015, https://bepsmonitoringgroup.wordpress.com/2015/10/05/overall-evaluation/; Eurodad, ‘An assessment of the G20/ OECD BEPS outcomes: Failing to reach its objectives’, October 2015, https://eurodad.org/BEPSfacts; The All-Party Parliamentary Group on Responsible Tax, ’A more responsible global tax system or a “sticking plaster”?’, August 2016, http://www.cipfa.org/~/media/appg/sticking-plaster-appg-responsible-tax-report.pdf.