Last year, the Paradise Papers laid bare the extent to which multinationals and extremely wealthy individuals exploit a broken global system.
This system allows them to avoid paying their fair share of tax which contributes to poverty and inequality around the world. One year on, it is clear we still need to do more.
The Paradise Papers revealed the murky world of tax avoidance. Global corporate giants, celebrities and politicians were exposed for stashing away their low tax/untaxed wealth instead of paying their fair share of taxes in the countries where they earned that wealth. This is money that poor governments could have invested in roads, schools, and hospitals to help their people escape poverty.
And it’s not the first time this broken tax system has been exposed.
A recent history of scandals
In 2014, the International Consortium of Investigative Journalists (ICIJ) revealed how more than 340 companies secured secret deals from Luxembourg allowing them to avoid paying billions in tax in the countries they operate. The Lux Leaks scandal – as it became known – described how some companies paid less than 1% of tax on their profits. This occurred by exploiting loopholes in tax laws around the world to avoid paying taxes.
The Panama Papers followed in 2016 and was one of the biggest leaks in the history of journalism. 11.5 million documents showed Panama-based law firm, Mossack Fonseca, at the center of a scandal involving people in more than 200 countries, 241,000 offshore entities and, in some cases, linking to terrible crimes.
The Paradise Papers was another wakeup call. It revealed how multinational corporations – like the four in our latest report – continue to funnel their profits to countries with very low, or no, taxes. This unfair tax avoidance deprives poor governments of much-needed income which they could then invest in the public services their people need to escape poverty.
Somebody pays – and it’s not the multinational corporations
Every hour, 35 women die due to inadequate maternal health care. That’s one every two minutes. And around the world women give up their jobs and essential income to take care of loved ones when the health system fails.
Even though tax avoidance hurts us here in New Zealand, worldwide women and children living in poverty pay the biggest price. When governments don’t have crucial funds to invest in their people, they are forced to balance their budgets by cutting back on the essential services that the poor rely on. Losing out on education and healthcare, women are deprived of the chance to improve their lives and lift themselves and their families out of poverty.
What has changed since the Paradise Papers?
Your stand against tax avoidance has led New Zealand to take positive steps towards addressing these issues within our nation. Our government has expanded the disclosure rules on foreign trusts recommended in the Shewan inquiry, passed the 2018 Tax Neutralization Act, and created the Tax Working Group to examine the structure, fairness and balance of New Zealand’s tax system. This is a great start. But it is not enough.
Multinational corporations still have the resources to exploit a complex global tax system. To fix this broken system, corporations need to publish country-specific financial information also known as Public-Country-by-Country Reporting. Transparency will ensure that poor governments get the revenue they are due, so they can invest in the services that save lives.