More than $2.1 trillion in Fortune 500 company profits are held offshore, a new study has found. Apple, American Express and Nike are called out as the worst offenders among the at least 358 companies found to use offshore tax havens. It all amounts to $620 million in lost taxes for the U.S.
Pressure is increasing globally to crack down on tax havens and the individuals and corporations that use them to evade taxes.
“Congress can and should take strong action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, reduce the deficit and improve the functioning of markets,” concluded the research published by Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund.
Campaigns to bring attention to tax evasion have elicited promises from leaders, including President Obama and U.K. Prime Minister David Cameron, to close loopholes and end tax havens. The pressure to eliminate illicit financial flows and close tax havens continue, despite few successes.
The recent data on the Fortune 500 companies builds on the fact base that this is a global problem. Yet, little is changing. When developing countries raised the issue of taxes during July’s U.N. Financing for Development conference in Ethiopia, wealthy nations balked.
Negotiations centered on providing the funding to achieve the now-adopted Global Goals for Sustainable Development (SDGs). A push for tighter rules on global taxes nearly derailed the conference. The resulting Addis Tax Initiative was filled with compromises that it barely altered the existing and unsuccessful effort by the Organisation for Economic Cooperation and Development, advocates said.
“Developing countries held firm in Addis on the need to set up an intergovernmental tax body that would give them an equal say in how the global rules on taxation are designed,” said Winnie Byanyima, head of Oxfam International, after the meeting. “Instead they are returning home with a weak compromise meaning rigged rules and tax avoidance will continue to rob the world’s poorest people.”
Estimates show that as much as $20 trillion is held in tax havens. The more than $150 billion in taxes generated from that money is enough to eliminate extreme poverty twice over, Oxfam estimated in 2013. Tax evasion activists argue that the money lost could go toward funding public services.
“It’s scandalous that so much money is allowed to sit untaxed, letting off the hook those individuals who can most afford to pay for public goods and services. Many governments claim to have no alternative but to cut public spending and development aid,” said Kevin Roussel, head of Oxfam’s essential services campaign, at the time.
Taking a wider point of view, the ONE Campaign said that developing countries lose about $1 trillion per year due to corruption, tax evasion and money laundering. It too links the lost money to a missed opportunity to provide essential – and in some cases lifesaving – services to the world’s poor.
“For too long, G20 countries have turned a blind eye to massive financial outflows from developing countries which are channeled through offshore bank accounts and secret companies,” said Kenyan anti-corruption campaigner John Githongo. “Introducing smart policies could help end this trillion-dollar scandal and reap massive benefits for our people at virtually no cost. The G20 should make those changes now.”
The warnings seemingly fall on deaf ears as tax havens remain. Wealthy individuals and corporations continue to exploit a global system that allows them to hide their money from taxes.