Tax havens serve ‘no useful purpose,’ say more than 350 leading economists
TheStar.com – News/World – As the revelations of the Panama Papers continue to grow, economists called on world leaders to move toward “ending the era of tax havens,” Monday.
May 10, 2016. By Marco Chown Oved, Foreign Affairs Reporter
Tax havens “serve no useful economic purpose” and their “veil of secrecy” should be lifted, say more than 350 of the world’s leading economists in an open letter made public in the wake of the Panama Papers revelations < https://www.thestar.com/news/panama-papers-tax-evasion.html >.
The letter’s signatories, which include celebrity economists like Jeffrey Sachs and Thomas Piketty, as well as professors at Harvard, Oxford and the Sorbonne, denounce tax havens because they contribute to global inequality.
“Territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there, are distorting the working of the global economy,” state the experts. “Whilst these jurisdictions undoubtedly benefit some rich individuals and multinational corporations, this benefit is at the expense of others.”
Search the database here: ICIJ Offshore Leaks Database: < https://offshoreleaks.icij.org/#_ga=1.86749085.408524692.1458078272 >
The economists say the Panama Papers investigations, which were carried out in Canada by the Star and CBC/Radio-Canada, have revealed that “the secrecy provided by tax havens fuels corruption and undermines countries’ ability to collect their fair share of taxes.”
And while estimates put the cost to Canadian tax coffers at between $6- and $7.8-billion per year, the effects on developing countries is far greater, said Haroon Akram-Lodhi an economist and professor of international development at Trent University.
“The amount of capital flight from sub-Saharan Africa is absolutely huge and it’s all going into these tax havens,” said Akram-Lodhi, one of the signatories of the letter. “This is reducing the ability to fight poverty on a global scale.”
The letter, made public on the eve of this week’s global anti-corruption summit in London, calls on world leaders to take action against financial secrecy both in tax havens and at home.
“To lift the veil of secrecy surrounding tax havens we need new global agreements on issues such as public country-by-country reporting, including for tax havens. Governments must also put their own houses in order by ensuring that all the territories, for which they are responsible, make publicly available information about the real ‘beneficial’ owners of company and trusts.”
On Monday, Transparency International Canada issued a parallel call for the Canadian government to make its own corporate registry more transparent.
“There is a pressing need for the Government of Canada to take concrete steps to address the ability of some Canadians to shield themselves, and their financial activities, from Canadian authorities,” said Peter Dent, president of Transparency International Canada
“That some can rig the system to hide their wealth, whether amassed legally or not, is not merely unjust; it also masks corruption and harms global development by siphoning off revenues that could be directed to education, health care and infrastructure,” Dent said in a statement.
While the growing movement to crack down on tax havens has been spearheaded by the richest countries through the Organization of Economic Cooperation and Development (OECD), the negative effects of depleted government revenues hit the poorest countries the hardest.
Uganda, an East African country which has often been described as a “donor darling,” remains stuck in a cycle of poverty largely due to its inability to provide state services, said Akram-Lodhi.
“They don’t collect enough tax (because) multinational corporations evade their fair share,” he said.
While the UK government collects 25 per cent of its GDP in tax revenue, Uganda is only able to get 11 per cent, according to World Bank statistics. < http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS >
Instead of having to wait longer for a new subway, low tax revenue has far graver consequences in the developing world, he said.
“Tax avoidance in Canada doesn’t lead to people going hungry. Tax avoidance in sub-Saharan Africa leads to people dying of hunger. It’s that clear,” Akram-Lodhi said. “It’s criminality that ruins people’s lives.”
Another signatory of the letter, Peter Dietsch, an associate professor of philosophy and economics at the Université de Montréal, said the Panama Papers have “opened a window of opportunity for action.”
Describing the underlying conflict over tax havens as being between people who have capital and those who don’t, Dietsch said anti-tax haven forces are growing.
“There’s now a growing coalition of individuals without capital who pay their taxes and small and medium enterprises who don’t have resources to move their assets abroad.
< https://www.thestar.com/news/world/2016/05/09/tax-havens-serve-no-useful-purpose-say-more-than-350-leading-economists.html >
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Economists’ open letter to ‘end the era of tax havens’ < https://www.thestar.com/news/world/2016/05/09/economists-open-letter-to-end-the-era-of-tax-havens.html >
thestar.com – news/world – Amid the ongoing revelations of the Panama Papers, more than 350 leading economists signed an open letter calling on world leaders to “end the era of tax havens,” Monday, May 9, 2016.
Dear world leaders,
We urge you to use this month’s anti-corruption summit in London to make significant moves towards ending the era of tax havens.
The existence of tax havens does not add to overall global wealth or well-being; they serve no useful economic purpose. Whilst these jurisdictions undoubtedly benefit some rich individuals and multinational corporations, this benefit is at the expense of others, and they therefore serve to increase inequality.
As the Panama PapersPanama Papers and other recent exposés have revealed, the secrecy provided by tax havens fuels corruption and undermines countries’ ability to collect their fair share of taxes. While all countries are hit by tax dodging, poor countries are proportionately the biggest losers, missing out on at least $170bn of taxes annually as a result.
As economists, we have very different views on the desirable levels of taxation, be they direct or indirect, personal or corporate. But we are agreed that territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there, are distorting the working of the global economy. By hiding illicit activities and allowing rich individuals and multinational corporations to operate by different rules, they also threaten the rule of law that is a vital ingredient for economic success.
To lift the veil of secrecy surrounding tax havens we need new global agreements on issues such as public country by country reporting, including for tax havens. Governments must also put their own houses in order by ensuring that all the territories, for which they are responsible, make publicly available information about the real “beneficial” owners of company and trusts. The UK, as host for this summit and as a country that has sovereignty over around a third of the world’s tax havens, is uniquely placed to take a lead.
Taking on the tax havens will not be easy; there are powerful vested interests that benefit from the status quo. But it was Adam Smith who said that the rich “should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” There is no economic justification for allowing the continuation of tax havens which turn that statement on its head.
Canadian signatories
A. Haroon Akram-Lodhi, professor of international development studies, Trent University
Peter Dietsch, associate professor of philosophy, Université de Montréal
Hashmat Khan, associate professor of economics, Carleton University
Kiari Liman-Tinguiri, president of IEDAS Inc., Ottawa
Patricia E. Perkins, professor, faculty of environmental studies, York University
Toby Sanger, senior economist, Canadian Union of Public Employees
More on thestar.com:
Economists’ open letter to ‘end the era of tax havens’
The secrecy specialists behind Panama Papers’ Canadian offshore dealings
Panama Papers whistleblower speaks out, targets ‘wrongdoing by the elite’
< https://www.thestar.com/news/world/2016/05/09/economists-open-letter-to-end-the-era-of-tax-havens.html >
Tags: economy, featured, globalization, ideology, privatization, tax
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