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Developing countries miss out on up to $124 billion every year in lost income from offshore assets held in tax havens, international agency Oxfam said today ahead of the G20 Finance Ministers’ meeting on Saturday.
A new analysis conducted for Oxfam by James Henry, former Chief economist at McKinsey & Co, found that at least $6.2 trillion of developing country wealth is held offshore by individuals, depriving developing countries of annual tax receipts of between $64-124bn. If money moved offshore by private companies was included this figure would be much higher.
The scale of the losses could outweigh the $103bn developing countries receive annually in overseas aid. And capital flight is a growing problem with an additional $200-300 billion being moved offshore each year.
Tighter regulation of tax havens will be a key item on the agenda of G20 Finance Ministers meeting ahead of the London Summit on April 2 and is the subject of a public seminar and demonstrations on Jersey today.
Oxfam is calling for reform of tax havens and wider reform of the financial system to reduce volatility, increase accountability and give developing countries a greater say in the management of the global economy. It is also pressing G20 leaders to agree a bailout for poor countries to help them escape the worst affects of the financial crisis.
British Prime Minister Gordon Brown has recently spoken of the need for action on tax havens, which include British territories such as Jersey, Isle of Man and the Cayman Islands, but has not yet come up with any concrete proposals. France and Germany have been leading calls for a crackdown.
Sebastien Fourmy, Policy and Advocacy Director from Oxfam France said: “Developing countries are losing billions of pounds every year that would provide a vital boost to their economies and could be spent on reducing poverty.
“This money could pay for health and education services, for protection against the deepening impact of the economic crisis such as safety nets to help those who have lost jobs and for projects to protect poor people already affected by climate change. $16bn a year would be sufficient to give every child a school place and $50bn a year is needed to help poor countries protect their people from climate change.
“The current financial crisis shows our leaders can no longer afford to stand idly by whilst tax havens take billions of pounds from the pockets of taxpayers in rich and poor countries alike.
”Reform of tax havens would be an easy win for our leaders that would benefit ordinary people at home and abroad alike. There is no longer any excuse for delay.”
Oxfam is calling for new rules requiring tax havens to disclose information on money entering their jurisdiction and for multinational companies to report the taxes they pay in each country in which they operate. This would allow countries to identify individuals and organizations that illegally avoiding tax and take action to recover it.