Collecting tax is one of the key means by which governments are able to address poverty. But big business is dodging tax on an industrial scale, depriving governments across the globe of the money they need to address poverty and invest in healthcare, education and jobs, according to a new report by Oxfam.
Bermuda, the Netherlands, Ireland and Luxembourg are among the world’s 15 worst corporate tax havens, according to new Oxfam research published today. The report ‘Tax Battles,’ reveals how these tax havens are leading a global race to the bottom on corporate tax that is starving countries out of billions of dollars needed to tackle poverty and inequality.
The full list of the world’s worst tax havens, in order of significance are: (1) Bermuda (2) the Cayman Islands (3) the Netherlands (4) Switzerland (5) Singapore (6) Ireland (7) Luxembourg (8) Curaçao (9) Hong Kong (10) Cyprus (11) Bahamas (12) Jersey (13) Barbados, (14) Mauritius and (15) the British Virgin Islands. The UK does not feature on the list, but four territories that the United Kingdom is ultimately responsible for do appear: the Cayman Islands, Jersey, Bermuda and the British Virgin Islands.
Oxfam researchers compiled the ‘world’s worst’ list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency).
Many of the countries on the ‘world’s worst’ list have been implicated in tax scandals. For example Ireland hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. And the British Virgin Islands is home to more than half of the 200,000 offshore companies set up by Mossack Fonseca - the law firm at the heart of the Panama Papers scandal.
Esme Berkhout, tax policy advisor for Oxfam said: “Corporate tax havens are helping big business cheat countries out of billions of dollars every year. They are propping up a dangerously unequal economic system that is leaving millions of people with few opportunities for a better life.”
Tax dodging by multinational corporations costs poor countries at least $100 billion every year. This is enough money to provide an education for the 124 million children who aren’t in school and fund healthcare interventions that could prevent the deaths of at least six million children every year .
Yet Oxfam’s report shows that tax havens are only part of the problem. Countries across the world are slashing corporate tax bills as they compete for investment. The average corporate tax rate across G20 countries was 40 percent 25 years ago – today it is less than 30 percent . The use of unproductive and wasteful tax incentives is also ballooning – particularly in the developing world. For example, tax incentives cost Kenya $1.1 billion a year – almost double their entire national health budget .
When corporate tax bills are cut, governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people. For example, a 0.8 percent cut in corporate tax rates across OECD countries between 2007 and 2014 was partially offset by a 1.5 percent increase in the average standard VAT rate between 2008 and 2015 .
“There are no winners in the race to the bottom on corporate tax. Ordinary people – particularly the poorest – are paying the price for this reckless competition through increases in personal taxes and cuts to essential services, such as healthcare and education. Governments must work together to stop this crazy race to the bottom on corporate tax and ensure companies pay their fair share,” said Berkhout.
Oxfam is calling for all governments to work together to stop tax dodging and the race to the bottom on corporate tax:
- Stop unfair and unproductive tax incentives and work together to set corporate tax at a level that is fair, progressive and contributes to the collective good
- Ensure tax blacklists are based on objective, comprehensive criteria including whether or not a country offers zero rates of corporate tax;
- Improve tax transparency by requiring all multinational companies to publish financial reports for every country in which they operate, so it is clear what taxes companies are paying and where.
Notes to editors
Download a copy of the report, ‘Tax Battles: the dangerous race to the bottom on corporate tax.’
A methodology document which outlines how Oxfam compiled the list of the world’s worst tax havens is also available.
The Lux Leaks whistleblowers appeal trial begins in Luxembourg on Monday 12 December. Antoine Deltour and his co-defendants exposed tax deals negotiated by Luxembourg tax authorities that enabled multinational companies to dodge millions of dollars in taxes. Oxfam is calling for whistleblowers to be protected – not prosecuted. Luxembourg is the 7th worst corporate tax haven.
Both Europe and the G20 are committed to introducing tax haven blacklists to clamp down on corporate tax dodging. However a failure to use objective and comprehensive criteria to compile the lists means many of the world’s worst corporate tax havens are unlikely to be listed. EU blacklist criteria may not include a zero percent corporate tax rate which would mean that Bermuda, the world’s worst tax haven, could escape the list. It is also clear no European country will feature despite Oxfam’s analysis indicating that Ireland, the Netherlands, Luxembourg, and Cyprus are among the world’s worst corporate tax havens. The G20 blacklist will be weaker still as it only looks at criteria related to financial transparency
 Tax dodging costs developing countries $100 billion a year - UNCTAD World Investment Report (2016). Total annual domestic financing gap to achieve universal pre-primary, primary and secondary education in low and low middle income countries is $39 billion per year - Education for All Global Monitoring Report(July 2015). There are 124 million children out of school - UNESCO Data. $32 billion would fund the key healthcare to save the lives of 6 million children across the world each year - The Lancet (April 2014).
 ‘G20 Corporation Tax Ranking’ Oxford University centre for business taxation’
 Corporate tax incentives are estimated to cost Kenya around $US1.1 billion per year or KShs 100 billion - Tax Justice Network Africa and Action Aid International report: Tax Incentives in East Africa. Kenya’s health budget for 2015/16 was KShs 60 billion or US$591 million dollars - IBP Analysis of Kenya Budget Policy Statement (2016).
 OECD Revenue Statistics (2015)