Tax dodging by corporations and the wealthy costs over $560 billion a year | Unions Yeah!

Tax dodging by corporations and the wealthy costs over $560 billion a year

Ottawa (20 Nov. 2020) — A new report from the Tax Justice Network (TJN) estimates that tax dodging by multinational corporations and the wealthy is costing governments around the world over C$560 billion a year. At a time when health care systems are struggling to cope with the impact of the COVID-19 pandemic because of staffing shortages, it’s estimated that the funds lost due to tax dodging would pay the salaries of almost 34 million nurses.

Canada losing well over $7.9 billion a year to tax dodging

The report estimates that Canada is losing over C$7.9 billion a year due to tax abuse. This is due to a combination of corporate tax abuse and the wealthy using tax havens. C$7.9 billion represents 4.3% of public health care spending in Canada. 

It is never acceptable for public services to be starved of funds because large corporations and the wealthy aren't paying their share in taxes. But when underfunding of our health care system means that we may be unable to care for people during the COVID-19 pandemic, it’s obscene.

Estimate in TJN report just the tip of the ice-berg

Losing C$560 billion a year due to tax dodging by large corporations and the wealthy is bad enough, but as the TJN acknowledges that figure is just the tip of the iceberg. The TJN report only looked at direct losses due to tax abuse. Given that the International Monetary Fund (IMF), an organization that is usually very friendly to multi-national corporations, has estimated that the indirect costs of tax abuse are generally 3 times the direct costs, we can assume the real cost of tax abuse is far higher.

As Canadians for Tax Fairness pointed out, Canada could be losing as much as C$25 billion a year due to corporate tax abuse — and that’s before the impact of tax avoidance by the wealthy is added in.

Wealthy countries responsible for almost 98% of tax losses

While the popular image of tax havens is an island in the Caribbean, the reality is that it is wealthier countries that are responsible for 98% of losses from tax abuse. 55.4% of the losses are due to what TJN calls the “axis of tax avoidance.” The axis of tax avoidance refers to countries with laws that enable tax abuse. These include the United Kingdom, with its overseas territories and dependencies, the Netherlands, Luxembourg and Switzerland.

Weaknesses in Canadian laws and regulations mean that, as well as losing money due to tax abuse, Canada is also contributing to the problem. It’s estimated that Canada is responsible for C$10.5 billion in tax losses in other countries. 

What is also important to remember is that when weaknesses in a country’s laws enable tax abuse, only a handful of people in that country benefit. The average Canadian doesn’t benefit from the C$10.5 billion in losses in other countries for which Canada is responsible. But when a country loses money due to tax abuse, everyone suffers. 

Tax abuse is not a victimless crime

As Rosa Pavanelli, the general secretary of Public Services International, pointed out when introducing the report, “The reason frontline health workers face missing PPE and brutal understaffing is because our governments spent decades pursuing austerity and privatization while enabling corporate tax abuse.”

A large number of the deaths in the COVID-19 pandemic can be traced back to understaffing in the health care system and lack of PPE. If the money lost to tax abuse had been available to hire more staff and ensure health care workers were properly protected, many of the people who died during the pandemic would still be alive.