Tax havens / secrecy jurisdictions* deliberately, knowingly and successfully redistribute wealth from the poorest in society to the richest. They do this in many ways.
The facility they offer to those who want to avoid and evade their tax liabilities is only available to those who can afford the services of the offshore financial community who work within them – and they do not come cheap. This ensures that it is only the wealthiest people and the largest companies, in turn owned by those wealthiest people, who can have access to them – especially if they wish to use these places with any degree of legitimacy. The consequence is simple: the richest people and largest companies often pay a lower proportion of their income in tax than the poorest in society.
The evidence is clear. In the TUC’s the Missing Billions published in 2008 based on 2008 data it was reported that the largest companies in the UK paid tax in the UK at an average rate of about 22% – with the rate having fallen by 0.5% a year over the previous seven years. That means by now the average rate would be about 21% except for the fact that the headline rate of tax has fallen by 2% as well. Large companies now probably pay tax at an average rate of 19%.
Small companies now pay tax at 21%. They will soon be taxed at 22% in the UK. Their effective rates are higher in almost all cases. The use of tax havens has unambiguously shifted the burden of corporate tax onto small companies.
The same is true of individuals where in the UK the lowest decile have a much higher effective tax rate than the top decile – and many in the top 1% of ‚Äòincome’ earners pay little or no tax.
But that is just the domestic effect. Internationally it is worse. Tax havens facilitate the flow of $800 billion of illicit funds a a year from developing countries to the developed world.
Transfer mispricing that they facilitate costs developing countries $160 billion a year.
Tax evasion they facilitate denies governments at least $250 billion a year in tax revenues from high net worth individuals.
You can argue about the numbers. They are always massively bigger than the total aid budget of $100 billion – and of course they massively undermine the effectiveness of that by providing the services that ensures that corruption can occur.
Systemically tax havens / secrecy jurisdictions are designed to achieve this goal. And they do achieve it.
No wonder more than a billion people – a sixth of the world’s population live in poverty.
And directly as a result of what tax havens do 1,000 children die every day.
That’s what tax havens do.
* There is no agreed definition of a tax haven. Secrecy jurisdictions are ion the other hand precisely defined. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.