Developing Countries Losing Billions To Corporate Tax Avoidance
BANGKOK, Sept 10 (Bernama) — Developing countries may be losing over US$160 billion annually due to corporate tax avoidance – money that could fund greater policy ambitions to get the global economy out of the doldrums and moving towards a more inclusive and sustainable future.
Greater policy ambition in both rich and poor countries to get the global economy out of the doldrums needed greater public resources and to reduce fiscal haemorarrhaging via tax havens and transfer mispricing as well as tax competition, according to a United Nations (UN) report.
However, tax optimisation which is now part of normal business practices and tax competition have constrained governments’ fiscal revenues, according to the UN Trade and Development (UNCTAD) Report 2014, titled ‘Global Governance And Policy Space For Development’.
The foregone revenue globally was difficult to assess but “it’s probably a big number”, said Aynul Hasan, Officer-in-Charge, Macroeconomic Policy and Development Division, UN Economic and Social Commission for Asia and the Pacific (ESCAP) at the launch of the report, Wednesday.
About 8.0-15 per cent of the net financial wealth was held in tax havens, resulting in a loss of public revenue amounting to US$190-US$290 billion per year, he said when making a presentation at the launch of the report.
The loss included US$66-US$84 billion in the developing countries, he said.
He said the main vehicle for corporate tax avoidance or evasion was the misuse of transfer pricing and thin capitalisation for shifting accounting profits to low- or no-tax jurisdictions.
According to the UNCTAD Report, the world economy has not yet escaped the growth doldrums in which it has been marooned for the past four years, and there is a growing danger that this state of affairs is becoming accepted as the “new normal”.
Policymakers everywhere, but particularly in the systemically important economies, needed to assess current approaches and pay closer attention to signs of inclement economic weather ahead, it said.
It said the global economy was projected to increase moderately to between 2.5 per cent and 3.0 per cent in 2014 from 2.3 per cent in 2012 and 2013.
Asia is projected to remain the most dynamic region, growing at around 5.5 per cent, with China leading with close to 7.5 per cent growth.
