Daily Management Review

Tax Justice Network calculates losses due to tax evasion and their impact on COVID-19 fight


The non-governmental organisation Tax Justice Network (TJN) has issued a report on the losses of the world's governments from tax evasion, the withdrawal of funds and assets to tax havens by companies and individuals.

TJN estimates that the unpaid $427 billion is equivalent to the annual income of 34 million nurses or the loss of one nurse's annual earnings every second.

Of the total, more than half - $245 billion - are losses from large companies. Another $182 billion are tax evasion by individuals. Corporations underpay taxes by withdrawing approximately $1.38 trillion of their profits to tax havens each year. Individuals hold assets worth approximately $10 trillion in "safe havens".

High-income countries are losing a larger amount ($382 billion) than low-income countries ($45 billion). However, tax evasion is more severe in the latter. They account for about 52% of total healthcare costs. This is only 8% in high-income countries.

In terms of income loss, low income countries also suffer more damage. About 5.8% of their total tax revenue is lost. In high-income countries it is only 2.5%.

North America and Europe lose $95 billion and $184 billion respectively from tax evaders. Latin America and Africa lose $43 billion and $27 billion respectively. However, for North America and Europe these losses are 5.7% and 12.6% of healthcare budgets, while for Latin America and Africa they are 20.4% and 52.5%.

TJN also identifies those responsible for this situation - that is, the countries and jurisdictions that evaders use. The British Overseas Territory of the Cayman Islands is responsible for 16.5% of all global tax losses, or about $70 billion. The United Kingdom itself is in the second place (10%, or $42 billion), the Netherlands is in the third place (8.5%, $36 billion), Luxembourg is in the fourth place (6.5%, $27 billion) and the United States is in the fifth place (5.53%, $23 billion).

The authors also offer a number of measures to combat losses due to tax abuses by companies and individuals. TJN considers the first measure to be the introduction of an excess profit tax on multinationals that receive it during a pandemic, such as high-tech companies. TJN believes that such a tax should be introduced on an international rather than national level so that IT giants cannot transfer profits to tax havens.

The second measure is the introduction of a tax on luxury, the proceeds of which should go to the pandemic funds. Higher rates should apply to private assets held in offshore and/or tax havens. To this end, governments must enter into agreements.

TJN considers the third measure to be the creation of a UN Convention and an international forum that would "develop multilateral standards for corporate taxation as well as intergovernmental tax cooperation to achieve due tax transparency".

source: taxjustice.net