According to a recent report from the Tax Justice Network (TJN), tax havens could lead to a staggering loss of US$4.7 trillion in tax revenue for countries over the next decade. This concerning trend is fueled by multinational corporations and affluent individuals who exploit tax havens to pay less in taxes than they should. The report identifies four countries as the main culprits in this global corporate tax loss, dubbing them the “axis of tax avoidance”: the United Kingdom, the Netherlands, Luxembourg, and Switzerland.
The UK, including its “second empire” consisting of overseas territories and crown dependencies, is responsible for a substantial portion (24 percent) of these losses, earning it the unenviable title of “the world’s greatest enabler of global corporate tax abuse”. The “second empire” has historically served as satellite offshore jurisdictions that facilitate the movement of illicit finances and corporate profits to tax-free regions.
When the UK, the Netherlands, Luxembourg, and Switzerland are combined, they account for over half of the US$301 billion lost annually due to corporate tax abuse, with an estimated US$151 billion coming from the US$550 billion in corporate funds shifted to these four countries.
All four nations are part of the Organization for Economic Co-operation and Development (OECD), a group of high-income countries that collects economic data and issues recommendations on regulatory reforms, corporate governance, and tax policies, impacting not only its members but the entire world.
The TJN report, based on data from the OECD involving 47 countries, estimates the potential loss of US$4.7 trillion in tax revenue. However, the actual figure may be higher, given the limitations of the OECD data and other related studies on the subject. The top ten contributors to this global issue of tax havens and financial secrecy, according to the analysis, are the UK, the Netherlands, the Cayman Islands, Saudi Arabia, Luxembourg, Bermuda, the United States, Singapore, Ireland, and Hong Kong.
In response to these alarming findings, UN Secretary-General António Guterres recently published a draft report exploring options for a new framework for international tax cooperation under the auspices of the UN. The TJN has long advocated shifting responsibility for corporate tax standards from the OECD to the UN. The group’s chair, Irene Ovonji-Odida, sees this as a historic opportunity to establish a “globally inclusive tax body”.
Taxes are viewed as a crucial tool in addressing inequalities, but the ease with which powerful elites sidestep their social obligations poses a significant challenge. Tax avoidance often involves separating taxable income from underlying assets and activities, declaring profits in one country while holding personal wealth through offshore entities, often secretly.
While major economies experience substantial losses from offshore tax evasion (about US$169 billion annually), lower-income countries, losing around US$2 billion annually, suffer the most significant impact in terms of overall tax revenue and essential services such as health and education.
TJN’s report emphasizes that those who are already marginalized economically and socially will bear the heaviest burden.
The report highlights the worsening issue of rampant global tax abuse over the past decade, despite promises from the OECD to address it. The TJN reiterates the need for substantial global reforms, presenting countries with a choice: either relinquish money to the wealthiest few or claim it, ensuring a future where the power of the wealthiest corporations and billionaires is constrained by the progress of democracy.
