The £190bn cost of global tax dodging
TAX avoidance is costing countries around the world £190bn a year and a crackdown is desperately needed, a top economic group has warned.
Figures from the Organisation for Economic Co-operation and Development (OECD), which represents the world’s major economies, will pile pressure on efforts to stop giant corporations from shifting profits into tax havens.
And they come as the European Union prepares to launch a tax raid on foreign tech firms such as Google, Facebook and Amazon so they are forced to pay their fair share.
In Britain, Chancellor Philip Hammond has threatened to impose a tax on tech firms unless international action is taken.
Pascal Saint-Amans, head of tax at the OECD, said: ‘Around £190bn a year of tax is lost through tax avoidance. This is a really conservative figure, so it’s probably bigger.’
A string of major foreign firms have been accused of paying too little tax in Britain. Earlier this month it was revealed that Facebook paid just £15.8m of UK corporation tax last year, despite revenues of £1.3bn. Meanwhile, US food firm Mondelez – the owner of Cadbury – has paid no net tax through its main UK arm since 2010. And Amazon’s warehouse arm Amazon UK Services paid only £4.5m of corporation tax in its most recent financial year.
The internet shopping giant has also come under fire over its business rates bill. Amazon pays just £14m in rates for its 14 giant warehouses in England and Wales – far lower bills than many smaller companies that are struggling to survive on the High Street.
Saint-Amans said that the EU or UK will not be able to solve the problem on their own. Instead, he said global tax rules must be changed to prevent tech firms from dodging taxes.
The OECD tried to take action three years ago but its efforts have since stalled. Saint-Amans said: ‘We’ve not delivered as much as we expected to, because the US at that time was opposed to any form of solution. That’s why a number of countries were very frustrated and said, “Well, if you can’t reach a deal at the OECD then let’s do something immediately.” But you need all the countries in the world, starting with the US, to agree on a set of rules that would allow you to tax without a physical presence.’
An Amazon spokesman said its total business rates bill is much higher than £14m once other offices are taken into account – but it refused to say what the figure was.
A spokesman said: ‘Amazon pays tens of millions of pounds more in business rates in England and Wales than suggested by the research, and our business rates bill has increased significantly in 2018, including an overall increase at the 14 sites mentioned.’
Earlier this week the OECD named and shamed 21 countries which offer so-called golden passport schemes that are damaging efforts to stop tax evasion. These nations – which include Malta and Cyprus inside the EU – allow the ultra-rich to buy a passport with an investment into the country, even if they have never lived there.
This gives them access to the nation’s financial system and may help criminals shift dirty money into mainstream banks.
Other countries, including the US and UK, also let wealthy people buy citizenship through a substantial investment, but their schemes are not deemed to be problematic by the OECD because of stricter rules.