62 people own same as half the world – EU needs to take action against tax havens

Pre-Davos report shows how rules privilege the richest 1%

Runaway inequality has created a world where 62 people own as much wealth as the poorest half of the world’s population combined – a figure that has fallen from 388 just five years ago, according to an Oxfam report published today ahead of the annual gathering of the world’s financial and political elites in Davos.

“An Economy for the 1%” shows that the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 38 per cent. Meanwhile, the wealth of the richest 62 individuals has risen by more than half a trillion dollars to $1.76 trillion. The Oxfam report also shows how women are disproportionately affected by inequality – on the current rich list of 62 people 53 are men and just nine are women. At the same time, women are also over-represented at the bottom of the wealth distribution.

World leaders now speak more frequently about the need to tackle inequality, and in September 2015 agreed to eliminate extreme poverty by 2030, setting a tangible global goal to reduce inequality. However, the gap between the richest and the rest has widened dramatically in the past 12 months. Ahead of last year’s Davos meeting, Oxfam had predicted that in 2016 the most affluent 1% would own more than the rest of us. But with inequality increasing ever more quickly, this actually came true in 2015 - a year earlier than expected.

One of the key drivers of inequality identified in Oxfam’s report is the falling share of national income going to workers in almost all developed and most developing countries. At the same time, there is a widening pay gap with wages at the top having rocketed and wages at the bottom of the pay scale stagnating. Women are particularly affected by this pay gap, constituting the majority of low paid workers around the world.

By contrast, those already wealthy have benefited from a rate of return on capital - via interest payments and dividends - that has consistently been higher than the rate of economic growth. This advantage has been compounded by the use of tax havens, one of the report’s most glaring examples showing how the rules of the economic game have been rewritten to enable the rich and powerful to entrench their wealth.

Oxfam is calling for urgent action to tackle the extreme inequality crisis which threatens to undermine the progress made in tackling poverty during the last quarter of a century. As a priority, the international organisation is calling for an end to the era of tax havens, which has seen the sprawling use of offshore centres by rich individuals and companies to avoid paying their fair share to society. This tax avoidance and evasion continues to deny governments valuable resources for public services that are vital to tackle poverty and inequality.

Winnie Byanyima, Oxfam International Executive Director, who will again attend Davos having co-chaired last year’s event, said:

“It is simply unacceptable that the poorest half of the world’s population owns no more than do a few dozen super-rich people who could fit onto one bus. World leaders’ concern about the escalating inequality crisis has so far not translated into concrete action – the world has become a much more unequal place and this trend is accelerating. We cannot continue to allow hundreds of millions of people to go hungry while resources that could be used to help them are sucked up by those at the top.

“The recent explosion in the wealth of the super-rich has come at the expense of the majority and particularly the poorest people. Multinational companies and wealthy elites are playing by different rules to everyone else, refusing to pay the taxes that society needs in order to function. The fact that 188 of 201 leading companies have a presence in tax havens shows it is time to act.”

Tax dodging by multinational corporations alone costs developing countries at least $100 billion every year, and corporate investment in tax havens almost quadrupled between 2000 and 2014.

Furthermore, it is estimated that globally a total of $7.6 trillion of individuals’ wealth sits offshore. If tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year.

In Africa alone, as much as 30 per cent of all African financial wealth is believed to be held offshore, costing an estimated $14 billion in lost tax revenues every year. This money could pay for family healthcare to save the lives of up to 4 million children a year, and to employ enough teachers to get every African child into school.

Enabling governments to collect the taxes they are owed from companies and rich individuals is crucial if world leaders are to meet their goal of eliminating extreme poverty by 2030.

Oxfam is calling for a move against tax havens to be part of a three-pronged attack on inequality. Urgent action must be taken to recover the missing billions lost to tax havens, but this needs to go hand in hand with governments’ commitment to invest in healthcare, education and other vital public services that make such a big difference to the lives of the poorest people.

At the EU level, the fight against tax avoidance has become increasingly relevant in recent months. Governments and people are realising that they are directly affected by large corporate tax dodging schemes, but governments are also directly responsible for a lack of effective action to close tax loopholes. Some EU member states have even triggered an endless and unproductive race to the bottom in tax rates.

Oxfam International EU Policy Advisor on Inequality and Taxation, Aurore Chardonnet, said:

“EU leaders and European multinational corporations must now take up their responsibility of putting an end to the era of tax havens.

“European institutions and member states need to go beyond the weak international standards which do not effectively prevent large scale tax dodging: they must set up a strong strategy that lists all tax havens and defines counter measures. And it is important that the EU brings its own house in order, making sure that those member states which are not cooperating are brought back into line.

“If the EU is serious about ending the era of tax havens, it also needs to deliver on tax transparency. Efficient measures aimed at fighting tax avoidance must go hand in hand with public scrutiny of companies’ behaviour. Oxfam is urging EU ministers to adopt public country-by-country reporting, which is a measure that requires big multinationals to disclose where they really make their profits and where they pay their taxes.”