Tax evasion damaging poor country economies

“The G20 needs growth strategies that are balanced and inclusive, and to achieve this they must fix the global tax system.”
Dmitri Medlev
Oxfam’s Russia country director
Published: 1 September 2013

G20 must act to rewrite international tax rules

Multinational tax evasion is entrenching poverty and weakening developing country economies, international agency Oxfam has warned ahead of the G20 leaders meeting in Russia to chart a plan for boosting global economic growth.

Developing countries lose an estimated $100 billion to $160 billion annually to corporate tax dodging1. Oxfam is urging the G20 to agree a rewrite of international tax laws at their 5-6 September summit in St Petersburg.

In July, G20 finance ministers approved a plan to clamp down on tax evasion by multinational corporates. So far, poorer countries outside of the G20 – who are particularly affected by corporate tax avoidance – have not been invited to participate in negotiations on new tax rules.

Oxfam’s Russia country director Dmitri Medlev said: “The world’s poorest countries can ill afford losing billions that could be spent on tackling poverty and boosting their economies. Now the G20 must finish the job without delay, and treat developing countries as equal partners in efforts to stop tax dodging.”

For every $1 billion draining out of developing countries via commercial tax evasion:

  • 11 million people at risk across Africa's drought-stricken Sahel region could have enough to eat2.
  • The annual salaries of 400,000 midwives in sub-Saharan Africa – where maternal mortality rates are the highest in the world – could be paid3.
  • 200 million mosquito nets to fight malaria could be purchased. In Africa, a child dies every minute of this preventable and curable disease4.

G20 leaders have acknowledged that for prosperity to be sustained it must be shared more equally. Income inequalities are growing in most G20 countries, dampening economic growth and undermining social cohesion and political stability.

Medlev said: “The G20 needs growth strategies that are balanced and inclusive, and to achieve this they must fix the global tax system.”

Oxfam is calling on the G20 to:

  • Clamp down on tax evasion and corruption draining poor country economies, and give poor countries a real voice in tax negotiations
  • Ensure that growth is fair and boosts equality, so that its benefits reach people living in poverty. As a first step G20 countries should make inequality reduction a measure of progress alongside GDP growth.
  • Invest in high-quality public health and education services. These are crucial safety nets for the poorest and those falling on hard times, as well as crucial investments in future productivity and a fairer society.

Medlev said: “Economic growth alone won’t be enough to prevent poverty escalating across G20 countries and beyond. The G20 must tackle the challenges of inequality to generate strong, sustainable, balanced and inclusive growth.”

Billions are lost in tax dodging: graphic

Notes to Editors

  1. ^ Global Financial Integrity estimates that developing countries lose $100bn annually from trade mispricing alone. This occurs when goods leave a country of export under one invoice, the invoice is redirected to another jurisdiction such as a tax haven where the price is altered, and then the revised invoice is sent to the importing country for clearing and payment purposes. Christian Aid estimates that trade mispricing and false invoicing costs developing countries $160 billion a year.
  2. ^ http://www.undpi.org/World-News/UN-Seeks-$1bn-to-Feed-Sahel-Says-Syria-Distracting.html
  3. ^ The average annual salary of a nurse or midwife in Sub-Saharan Africa is $2500.
  4. ^ http://www.who.int/mediacentre/factsheets/fs094/en/

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