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Tax Havens – and Tax Justice Network Australia

Last Updated: Jan 2, 2021

According to the Tax Justice Network, tax havens are a very significant influence in restricting the capacity of developing countries to finance their own development. See more at www.tackletaxhavens.com.

The Tax Justice Network quotes Raymond Baker, who runs Global Financial Integrity:

“Through most of the 1990s, aid was running at about $50bn a year from all sources. It has edged up slightly in this decade. $50bn of aid in; $500bn of dirty money out. For every $1 that we have been generously handing out across the top of the table, we’ve been taking back some $10 of illicit proceeds under the table. There is no way to make this formula work, for poor or for rich.” The $500bn coming illegally out of developing and transitional economies is equivalent to 8% of their GDP.

What is Tax Justice?

Tax evasion and avoidance robs the world’s poorest people while the rich get even richer. Tax Justice seeks to restore the taxes to whom they are due.

How do Poorer Nations Suffer from Tax Injustice?

Money lost by developing countries from ‘illicit financial flows’ is vast. It is lost mainly through tax evasion and tax avoidance[1], but includes other forms of corruption and crime.

The Anti-corruption non-government organisation, Global Financial Integrity, estimated collectively developing countries lost US$1,264 billion in illicit financial flows in 2008, much of this money laundered through secrecy jurisdictions.

  • Africa lost US$64 billion in illicit flows,
  • The Philippines lost US$16.4 billion,
  • India US$21.5 billion
  • Indonesia US$16.5 billion.[2]

Globally overseas aid in 2009 was only US$120 billion.

New research published by the Tax Justice Network shows that tax evasion costs 145 countries, representing over 98% of world GDP, more than US$3.1 trillion annually.[3]

Who is Avoiding Taxes?

Wealthy individuals and Multinational Corporations are the main culprits.

Why Do Poorer Countries Suffer so Much from Tax Evasion and Avoidance?

As a result of limited tax income, governments are restricted in their ability to provide the urgently needed health, education, roads, rail and law enforcement services. The burden of paying tax then falls on the poor.

How do Wealth Individuals and Large Corporations Avoid Paying Their Fair Share of Tax?

The use tax havens and a technique know as transfer pricing, or transfer mis-pricing.

What are Tax Havens and How are They Involved in Tax Avoidance?

Tax havens, (which are also known as ‘secrecy jurisdictions’ or ‘offshore’) – provide any of the following:

  • Escape from tax (of course)
  • Secrecy, in various forms
  • Avoidance of financial, labour, trade and other commercial regulations
  • Avoidance of criminal laws
  • Escape from other rules of society, such as disclosure or corporate governance rules

Tax havens can be whole countries, dependencies of bigger countries, or even areas within countries. They include The City of London, The Bahamas, Cayman Islands, Cyprus, Liechtenstein, Luxembourg, Mauritius, Panama, Singapore, Seychelles, Switzerland, Bermuda (United Kingdom), British Virgin Islands (United Kingdom), The Channel Islands of Jersey and Guernsey (United Kingdom), the states of Delaware (United States), Florida, Nevada, Texas, South Dakota, Wyoming (United States), and United States Virgin Islands.

How does Trade Mis-pricing work?

A multinational company(A) sells the product it produces in a poorer country at a low price to another it owns, company(B) registered in a tax haven. Company B sells the product to company (C) it owns in a richer, developed country at a much higher price paying little or no tax on the large profit generated in the tax haven. Company (C) (run by the multinational) in the richer country sells the product to the consumer at a very small profit margin owing to the large import price, and so pays a very small amount of tax. The big profits are made held in the tax haven which has a lowest low or nil rate of tax..

The following case involving case involving bananas provides more details.

What is the Australian Branch of the Tax Justice Network Doing to confront Tax Avoidance and Evasion?

Along with Tax Justice Networks in other counties, the Australian Tax Justice Network is asking the Federal Government for:

Automatic Tax Information Exchange: Establishment of an international agreement that would require tax authorities to automatically share information in relation to individuals and corporations, with appropriate safeguards on privacy. Such a system already exists in Europe, and is reported to work well in reducing tax evasion by European citizens.[4]

Country by Country Reporting: Introduction of legislation requiring oil, gas and extractive industry companies to report publicly their revenue, profits and taxes and royalties paid on a country-by-country basis.

Better disclosure of ownership and “know your customer” rules for financial institutions: There is a need for transparency of beneficial ownership of trusts and companies to combat corruption and tax evasion and enhanced ‘know your customer’ rules by financial institutions on government officials and politicians (known as Politically Exposed Persons). Countries, including Australia, should create mandatory national level registers or any other structure that discloses the beneficial ownership of companies and the beneficiary of trusts.

(Graphics: http://www.tackletaxhavens.com)

Who is Supporting Tax Justice Network Australia?

  • Synod of Victoria and Tasmania, Uniting Church in Australia
  • TEAR Australia
  • Anglican Overseas Aid
  • Baptist World Aid
  • Jubilee Australia
  • Caritas Australia
  • Oaktree Foundation
  • Columban Mission Institute, Centre for Peace Ecology and Justice
  • Australian Education Union
  • SJ Around the Bay
  • Global Poverty Project
  • National Tertiary Education Union
  • ActionAid

For more information: http://taxjustice.org.au  


[1] Tax evasion is breaking tax law and is illegal while tax avoidance is using legal loopholes to minimise paying tax without breaking the law.

[2] Dev Kar and Karly Curcio, ‘Illicit Financial Flows from Developing Countries: 2000 – 2009. Update with a Focus on Asia’, Global Financial Integrity, January 2011.

[3] “The Cost of Tax Abuse”, The Tax Justice Network, Nov. 2011. http://taxjustice.blogspot.com.au/2011/11/tax-evasion-is-worth-31-trillion-year.html

[4] Nicholas Shaxson, ‘Treasure Islands. Tax havens and the men who stole the world’, The Bodley Head, 2011, p. 280.