Unrigging the global tax system
This post is written by Raymond Offenheiser, President of Oxfam America
Today is tax day in the US, the last day for American taxpayers settle up with Uncle Sam. But as millions rush to finalize their tax returns before the midnight deadline, they might be surprised who isn’t paying their fair share. Tax dodging by multinational corporations costs the US an estimated $100 billion each year, a gap that the average American taxpayer would have to shell out an extra $760 to cover.
A new Oxfam report released last week puts the spotlight on the tax practices of the 50 biggest US companies, which have stashed more than a trillion dollars offshore and use more than 1,600 subsidiaries in tax havens to avoid billions of dollars in tax each year.
Tax havens are at the heart of a rigged global system that allows large corporations 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.
To make things worse, the same tricks costs the world’s poorest countries another estimated $100 billion every year, preventing them from making crucial investments in education, healthcare and infrastructure that could help lift their societies out of poverty. This $100 billion could provide safe water and sanitation to more than two billion people who currently go without.
This system, which has been rigged by the rich and powerful, has helped fuel runaway global inequality, where only 62 people in this world own as much a half of humanity, and where the wealth of the richest 1% surpasses the combined wealth of the rest of the world, as Oxfam reported back in January.
The global tax system is fundamentally broken.
In one recent year US companies moved about $700 billion –$1 out of every $4 in profits — from the locations where those profits were really earned to lower tax jurisdictions. UC Berkley economist, Gabriel Zucman, estimates that the share of total corporate profits US companies report in tax havens has increased tenfold since the mid 1980’s.
In the last 15 years, the effective corporate tax rate of US companies has declined from 30 to 20% and about two-thirds of this decline can be attributed to increased profit-shifting to low-tax jurisdictions.
Meanwhile federal policymakers have cut 85% of US federal programs supporting low-income families since 2010.
But oddly, the story you hear around corporate taxes in the US is too often a story about the need to lower US corporate tax rates to compete in a globalized economy. But these suggestions ignore the reality of tax havens, which the Panama Papers have really driven home. How do you lower your rates far enough to compete against a tax haven with a tax rate of zero?
You don’t.
The answer is not to try to win a race to the bottom but to fight the tax haven abuse that is contributing to global inequality. At Oxfam, we believe extreme inequality is not inevitable — it is the consequence of political choices. That’s why we’re calling on Congress to take steps like passing the Stop Tax Haven Abuse Act to crack down on these problems. But we need your help to level the playing field.
Join us today and tell your Senators and Representative to support the Stop Tax Haven Abuse Act now.
