How we fix it

The UN’s High-Level Panel on International Financial Accountability, Transparency and Integrity (FACTI Panel) described global tax abuse as a “double theft: an expropriation of funds that also robs billions of a better future.” Every year, the world loses over $427 billion in tax revenues to tax havens. More than half of that, $245 billion, is directly lost to cross-border corporate tax abuse by multinational corporations.

The Corporate Tax Haven Index is designed to identify the greatest sources of corporate tax abuse risks and to understand their origins so that people and the policymakers that represent them can take informed action.

Using Haven Score breakdowns to tackle corporate tax abuse at home

The Corporate Tax Haven Index thoroughly evaluates each jurisdictions tax and financial systems in order to identify the jurisdictions most responsible for enabling multinational corporations to abuse corporate tax. These evaluations are more than just report cards. They serve as troubleshooting manuals highlighting the laws and loopholes that policymakers can amend to prevent multinationals from using their tax and financial systems to continue to abuse corporate tax.

All jurisdictions enable some degree of corporate tax abuse, whether knowingly or not. Tax havens are often thought of in black and white; this country is either a tax haven or not. This binary idea of tax havens has particularly been popularised by “tax haven blacklists” like the EU’s list of noncooperative jurisdictions. In practice, all jurisdictions fall somewhere on the spectrum of corporate tax havenry. That’s why the Corporate Tax Haven Index is an index, not a list, and exactly what the index is designed to evaluate.

This means that all jurisdictions have a responsibility to guard against corporate tax abuse. All jurisdictions can use the Corporate Tax Haven Index’s evaluation of their tax and financial systems to identify the steps they can independently take at home to curb corporate tax abuse around the world.

Each jurisdiction’s evaluation, referred to as its “Haven Score breakdown”, is available on its country profile page here.

 A UN tax convention

Each step jurisdiction’s take at a domestic level goes a long way in preventing multinational corporations from abusing tax. But to truly put an end to a global problem, global fixes are needed. In a study into global tax abuse published by the UN’s High-Level Panel on International Financial Accountability, Transparency and Integrity, the UN FACTI panel called for “nothing less than a transformation of the global financial system” led by the United Nations.

After decades of campaigning, the prospect of establishing a UN tax convention finally became a real possibility in 2021 when a group of heads of states launched a report by a UN high level panel calling for a UN tax convention to formalise and uphold a package of tax justice policies. These tax justice policies would make sure multinational corporations are transparent about their financial affairs and are paying the right amount of tax, in the right place, at the right time.

A UN tax convention, like the Convention of the Rights of the Child and the Convention against Torture, would be an agreement adopted by the UN General Assembly that creates international norms and standards. A UN member state can sign onto the convention when the UN General Assembly adopts it to indicate support for the principles of the convention. The convention only becomes legally binding for the UN member state once the member state ratifies the convention.

For the past 60 decades, global tax rules have been set by a small club of rich countries at the OECD (Organisation for Economic Cooperation and Development), a membership organisation of 37 high income countries. In order to get approval from its most powerful member countries, the OECD has often had to water-down its global tax rules, at times to the point of obsolescence.

The global tax system built by the OECD is today drastically failing to curb global tax abuse. Countries are losing over $427 billion in tax every to tax havens – the equivalent of one nurse’s yearly salary lost to a tax haven every second. The OECD’s flagship safeguarding policy for detecting countries’ harmful tax practices is systematically failing to detect corporate tax abuse hazards. Countries graded as “non-harmful” by the OECD were found to be responsible for 98 per cent of the corporate tax abuse risks documented by the Corporate Tax Haven Index 2021.

The OECD’s attempt to reform the global tax system it had helped to build, failed to deliver any meaningful change. In 2020, the OECD sidestep a proposal it had prepared over several years in consultation with countries around the world, including non-OECD countries, in favour of a proposal that was prepared by the US and France privately behind closed doors and abruptly imposed on the OECD, and the world. The new proposal amounted to little more than a “tax haven lite” plan and was harshly criticised by leading economists from around the world. Joseph Stiglitz, recipient of the Noble Prize in Economics, said about the proposal:

“The proposals at the OECD are simply not adequate, they really represent the capture of this agenda by the multinational corporations and the countries that are closely allied with those multinational corporations.”

In 2021, the Corporate Tax Haven Index revealed that OECD countries and their dependencies were responsible for more than two-thirds of the global corporate tax abuse risks measured by the index. Meaning, the task of tackling global corporate tax abuse has proved not just to be almost impossible for the OECD but also grossly inappropriate.

A UN tax convention would move rule-making out of the hands of a few rich countries at the OECD and into the daylight of democracy at the UN. A globally inclusive forum at the UN would finally allow governments around the world to democratically and transparently determine global tax rules and make sure tax rules are principled on human rights, instead of the desires of the wealthiest multinational corporations.

The Tax Justice Network believes our tax systems are our most powerful tools for creating just societies that give equal weight to the needs of everyone. But for decades, the OECD, under pressure from corporate giants and powerful tax havens like the Netherlands and the UK, has programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else. This has fueled inequality, fostered corruption and undermined democracy.

We must reprogramme our global tax system to prioritise people’s wellbeing and livelihoods over the desires of those bent on not paying their tax. A UN tax convention would allow governments to take back control of global tax policy, and rewrite global tax rules to protect the needs of people everywhere.

Tax policies for tax justice

The UN’s High-Level Panel on International Financial Accountability, Transparency and Integrity (FACTI Panel) put forward a set of recommendations alongside its call for a UN tax convention in 2021. These recommendations consisted of a number of policies which the UN tax convention would formalise as international standards.

The recommendations fully reflect the policy platform created by the Tax Justice Network since its formal establishment in 2003. To learn more about this policy platform, why it matters and how it can make global tax abuse a thing of the past, view our interactive report here.