Pressure is building on corporations that avoid taxes, in Europe.
A new report claims Ikea, the Swedish furniture company, used tax havens and loopholes to avoid paying 1 billion euros in taxes between 2009 and 2014. The European Commission is investigating the practice after receiving the report commissioned by the Green party in the European Parliament.
Ikea denied the claim, saying that is in “full compliance with national and international tax rules and regulations.”
It appears Ikea, which has used its talents to support some humanitarian projects including emergency shelter, has indeed followed rules that allow it to shift profits and avoid taxes. That’s the point of the report. It was issued partly to bolster criticism that philanthropic efforts by corporations and wealthy individuals take away the attention from a more important duty – paying taxes.
The contribution of tax avoidance to global poverty and inequity is an issue championed by European humanitarian and advocacy organizations lately.
Campaigns coinciding with major international economic meetings have pointed out that corporations are not paying taxes by hiding their profits in tax havens. It is particularly concerning because the uncollected tax money could go to public services ranging from health care to humanitarian response. European countries lose tens of millions of dollars each year to tax avoidance.
The consequences are worse for developing countries. Trillions of dollars of individual and corporate wealth are held in tax havens. An analysis by Oxfam of 200 companies around the world revealed that 90 percent had a presence in a tax haven. For Africa, roughly one-third of individual wealth is held in tax havens. This means an estimated $14 billion in tax revenues are lost each year, estimates Oxfam.
Tax avoidance was one of the core problems raised by Oxfam in its report on global inequality last month. The lost revenues are enough to provide life-saving healthcare to 4 million children and staff enough teachers to achieve universal school access. Not every dollar recovered would be used for such purposes, but it illustrates the massive loss caused by tax avoidance. It is one of the most illustrative examples of increasing inequality around the world and the benefits experienced only by the wealthiest.
“Tax havens are at the heart of a global system that allows large corporations and wealthy individuals to avoid paying their fair share, depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality,” said Ray Offenheiser, president of Oxfam America, in a statement coinciding with the recent report.
Oxfam is joined by other NGOs such as ActionAid and the advocacy group the ONE Campaign, in drawing attention to the issue. The campaigns are starting to pay off. Efforts are underway in the European Union to close down tax loopholes. New rules will allow countries to collect taxes on profits that are moved elsewhere by corporations. The money that Ikea supposedly shifts through a Netherlands subsidiary to Lichtenstein or Luxembourg would be taxed.