G20 must turn the tide on rising inequality and tackle tax dodging

G20 Leaders meeting in Brisbane, Australia this weekend (15 and 16 November) are being urged to tackle rising inequality head-on or risk leaving millions of people trapped in poverty, as new figures reveal the wealth disparity in a number of G20 countries.

Oxfam’s report ahead of the G20, Turn the Tide: Why the G20 must act on rising inequality, reveals that since the Australian Government took over the presidency in December 2013, the total wealth in the G20 increased by $17 trillion, but the richest one per cent of people in the G20 captured a staggering US $6.2 trillion of this wealth – 36 percent of the increase.

Oxfam International Executive Director Winnie Byanyima said that with inequality rising globally and with G20 countries home to more than half the world’s poorest people, the G20 needed to heed the warnings from organisations such as the IMF, the World Bank and the OECD and acknowledge inequality was derailing poverty alleviation and threatened economic growth.

“There’s a growing consensus that inequality needs to be urgently addressed, and G20 leaders are in a position to turn the tide,” Ms. Byanyima said.  

“The G20 needs to commit to strategies of inclusive growth, and take action to reduce inequality rather than narrowly focusing on GDP.”

Global tax rules need to be reformed

She said one way to tackle inequality was to crack down on the use of tax havens and tax-dodging by multinational corporations. Oxfam calculates that poor countries miss out on $100 billion each year because of corporate tax avoidance.

Ms. Byanyima said the G20-mandated global tax reform under way (carried out by the OECD) was a good first step, but may not result in better outcomes for the poor as the majority of developing countries did not have a place at the negotiating table. The anticipated announcement of a road map to ‘upgrade’ the involvement of countries which are not members of the G20 or OECD is a welcome attempt to stack the cards more fairly, but still fails to reconcile the fact that governments representing a third of the world’s population are denied an equal say on the reform of global tax rules. 

Key issues that need to be addressed include tax competition between countries, whereby poor countries reduce their tax rate to attract foreign investment, and the question of where profits are taxed – where a country is headquartered or where it makes its profits.

For example, in 2012, the tax incentives for multinationals operating in Sierra Leone – where Ebola is currently raging – were equivalent to 59 percent of the country’s entire budget, and more than eight times the government’s spending on health.

Ebola crisis is just an example

Ms. Byanyima said a vivid example of the role of growing social and economic inequalities was the Ebola crisis, which was tearing through West Africa because countries didn’t have the public health infrastructure to stop it.

“G20 leaders need to swiftly ensure all the personnel, equipment and funding required to halt the Ebola outbreak are made available,” she said.

Ms. Byanyima said a comprehensive approach to addressing the problem of inequality also demanded a focus on gender equity and a commitment to women’s rights that went beyond the G20 target to lift women’s participation in the workforce announced last week.