Economic Growth

Which countries are worst affected by tax avoidance?

An employee counts Euro notes at the Bank of Taiwan head office in Taipei May 10, 2010. Global policymakers unleashed an emergency rescue package worth about $1 trillion to stabilise world financial markets and prevent the Greek debt crisis from destroying the euro currency. REUTERS/Pichi Chuang (TAIWAN - Tags: BUSINESS) - RTR2DOS9

Tax avoidance is a global issue. Image: REUTERS/Pichi Chuang

Joe Myers
Writer, Forum Agenda
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Economic Growth?
The Big Picture
Explore and monitor how Financial and Monetary Systems is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Corruption

What would you do with $500 billion? The first challenge might be actually getting your head around quite how much money that is. If you like to travel in style you could buy 1,150 Airbus A380s, according to the published Airbus list price. If you just wanted to show off, you could cover a football field to a depth of 1.5 metres with cash.

So, it’s a lot of money. It’s also the amount of revenue the world is losing as a result of tax avoidance, according to a new report from the United Nations World Institute for Development Economics Research (pdf).

Corporate tax is a vital source of government revenue across the globe. It is especially vital in developing countries, argue the report’s authors. Their findings highlight the extent of global tax avoidance - as well as the countries facing the biggest shortfalls.

Who’s hardest hit by this lost revenue?

Well, it depends how you look at it.

Building on an earlier IMF study, the report offers two different perspectives - overall loss estimates, and losses as a percentage of GDP.

In terms of overall losses, you probably won’t be surprised to see some of the world’s biggest economies at the top. Given the size and strength of their economies, they’ve racked up significant losses. The US loses an estimated $188 billion every year, with China a distant second at $66.8 billion.

Have you read?

This chart from Statista gives a snapshot of the situation in some of the world’s major economies - all totting up losses of more than a billion dollars.

 Image 1
Image: Statista

The report emphasises the significance of the losses as a percentage of GDP: “The intensity of losses is substantially greater in low- and lower middle-income countries: and in sub-Saharan Africa, Latin America and the Caribbean and in South Asia compared to other regions.”

The chart below shows the countries worst affected as a percentage of GDP.

 Image 2
Image: World Economic Forum/United Nations World Institute for Development Economics Research

In contrast, the figure for the US is 1.13%, and for China just 0.75%.

Is the problem getting worse?

Again, it depends on how you look at it.

Overall losses have increased - especially in OECD countries - since 1980, as this chart from the report shows.

 Image 2
Image: UNU-WIDER

However, the situation does look different as a percentage of GDP. Using this measure, a much more varied picture emerges.

 Image 3
Image: UNU-WIDER

Is anything being done?

The OECD’s BEPS project has been working on this issue since 2013. More than 100 countries and jurisdictions are currently working together to tackle base erosion and profit shifting (BEPS).

The 15 point action plan aims to “close gaps in international tax rules that allow multinational enterprises to legally but artificially shift profits to low or no-tax jurisdictions”.

The OECD says that the project is especially significant in developing countries - those most affected by revenue loss, as the UN-WIDER report makes clear. It aims to engage them in the global tax agenda to make sure their needs are met.

The issue was also on the agenda at this year’s World Economic Forum Annual Meeting in Davos. The session ‘Taxation without Borders: A Fair Share from Multinationals’ looked at the action needed - particularly in the wake of the leak of the Panama Papers, which exposed the use of tax havens around the world.

Loading...
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Economic GrowthFinancial and Monetary SystemsGeo-Economics and Politics
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

A decade of slow growth? The World Bank’s chief economist on the global economic outlook

Linda Lacina and Ian Shine

September 25, 2024

About us

Engage with us

  • Sign in
  • Partner with us
  • Become a member
  • Sign up for our press releases
  • Subscribe to our newsletters
  • Contact us

Quick links

Language editions

Privacy Policy & Terms of Service

Sitemap

© 2024 World Economic Forum