MULTINATIONAL’S TAX AVOIDANCE

During recent years, in the context of the financial crisis, unions have been asked to accept cutbacks and austerity measures with the argument there is no money for public services. Nevertheless, the study Global Corporate Taxation and Resources for Quality Public Services, commissioned by the EI Research Institute on behalf of the Council of Global Unions, shows there is actually lots of money available!

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This money is not being collected through taxation, because multinational corporations (MNCs) have used their global reach to avoid their responsibility to contribute to national and community social needs through fair and responsible taxation.

Societies Lose Trillions

According to the EI Research Institute’s study, offshore deposit holdings in secret-type jurisdictions have expanded at an average of 9% per annum, outpacing the rise of world wealth in the last decade. An estimated 60% of all global trade is actually routed through tax havens. A similar situation can be found in the European Union: tax evasion is in fact estimated at 2-2.5% of European gross domestic product (GDP).

The study notes the real tax contribution from the corporate world to public finances and society in general is declining in spite of its rising share of profit. Whether through political pressures, or simply via tax evasion, the actual revenue from corporate income tax has fallen from about 4.2% of global GDP in 1985 to about 2.4% of global GDP in 2008. However, over this same period, corporate profits have increased their share of GDP in the major OECD countries, so that it now represents about 35% of GDP in this geographical area, compared with only about 25% in the early 1980s.

If corporations were still paying at the same effective rate as in 1980, they would be contributing the tax equivalent of about 5% of global GDP. Instead, half of that amount of revenue is lost, and has to be found from other sources.

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