Globally, it is estimated that super-rich individuals have stashed a total of $7.6tr in offshore accounts. If tax were paid on the income that this wealth generates, an extra $190 billion would be available to governments every year.
As much as 30% of all African financial wealth is estimated to be held offshore, costing an estimated $14billion in lost tax revenues every year. This is enough money to pay for healthcare for mothers and children that could save 4 million children’s lives a year and employ enough teachers to get every African child into school.
Nine out of 10 WEF corporate partners have a presence in at least one tax haven and it is estimated that tax dodging by multinational corporations costs developing countries at least $100 billion every year. Corporate investment in tax havens increased almost quadrupled between 2000 and 2014.
At the G8 in 2013, David Cameron promised that both the UK and the UK’s Overseas Territories and Crown Dependencies would introduce public registers of companies’ owners in an effort to crack down on the use of shell companies to avoid tax.
The UK has fulfilled that promise but so far only one Overseas Territory, Montserrat, and not a single Crown Dependency has followed suit.
Allowing governments to collect the taxes they are owed from companies and rich individuals will be vital if world leaders are to meet their new goal, set last September, to eliminate extreme poverty by 2030.
Although the number of people living in extreme poverty halved between 1990 and 2010, the average annual income of the poorest 10% has risen by less than $3 per year in the last quarter of a century. That equates to an increase in individuals’ daily income of less than a single cent a year.
Had inequality within countries not grown between 1990 and 2010, an extra 200 million people would have escaped poverty.
One of the other key trends behind rising inequality set out in Oxfam’s report is the falling share of national income going to workers in almost all developed and most developing countries and a widening gap between pay at the top and the bottom of the income scale. This particularly affects women, who make up the majority of low paid workers around the world.
In contrast, the already wealthy have benefited from a rate of return on capital via interest payments and dividends, for example, that has been consistently higher than the rate of economic growth.
This advantage has been compounded by the use of tax havens which are perhaps the most glaring example set out in the report of how the rules of the economic game have been rewritten in a manner that has supercharged the ability of the rich and powerful to entrench their wealth.
Committing to investment
Action to recover the missing billions lost to tax havens needs to be accompanied by a commitment on the part of governments to invest in healthcare, schools and other vital public services that make such a big difference to the lives of the poorest people.
Governments should also to make sure work delivers an acceptable standard of living for those at the bottom as well as for those at the top – including moving minimum wage rates towards a living wage and tackling the pay gap between men and women.
‘Ending extreme poverty requires world leaders to tackle the growing gap between the richest and the rest which has trapped hundreds of millions of people in a life of poverty, hunger and sickness.
‘It is no longer good enough for the richest to pretend that their wealth benefits the rest of us when the facts show that the recent explosion in the wealth of the super-rich has come at the expense of the poorest.’
Mark Goldring, Oxfam GB Chief Executive
Click here to read the full Oxfam report, An Economy for the 1%.