inequality

Oxfam’s 5-Point Plan to Build a Fairer Global Tax System

July 29, 2019

Endless corporate tax scandals?

When multinational corporations and the super-rich use tax havens to avoid paying their fair share, it is ordinary people, and especially the poorest, who pay the price. The Mauritius Leaks show that tax havens continue not only to exist but to prosper, despite government promises to rein in tax dodging. This briefing lists five steps governments can take to tackle tax avoidance, and end the era of tax havens and the race to the bottom on corporate taxation.

Oxfam’s 5-Point Plan to Build a Fairer Global Tax System.PDF

Mauritius Leaks Reveal Africa is Losing Crucial Tax Revenues to Tax Haven of Mauritius

July 23, 2019

Leaks reveal Africa is losing crucial tax revenues to tax haven of Mauritius.

Responding to research published by the International Consortium of Investigative Journalists today that multinational corporations are using the tax haven of Mauritius to avoid paying millions of dollars of tax across Africa, Peter Kamalingin, Oxfam’s Pan Africa Director, said:

“Mauritius Leaks provide yet another example of how multinational corporations are gaming the system to shrink their tax bills – and cheating some of the world’s poorest countries out of the vital tax revenues they need to get children into school or ensure people can see a doctor when they are ill.

“The true scandal is that this – like most tax avoidance schemes – is completely legal. Real political will is needed urgently to rewrite global tax rules and introduce a global minimum effective tax rate that is paid by all multinational corporations no matter where they are based. This would put a stop to the damaging tax competition between countries and remove the incentive for profit shifting – effectively putting tax havens like Mauritius out of business.

‘’African governments should revise their tax policies with Mauritius and other tax havens and defend their tax revenues better. Countries do not need to wait for global action, unilateral action is possible.’’

Oxfam New Zealand’s Executive Director Rachael Le Mesurier said: “These revelations show the importance of political will for cracking down on tax avoidance. We need the New Zealand government to support the calls for a global minimum effective tax rate at the OECD negotiations.

“New Zealanders care about corporations and the super-rich paying their fair share like everyone else; Oxfam NZ’s ‘Fair Tax Now’ campaign saw over 430 people write a submission to Ministers Nash and Robertson on priorities to take to the OECD, and many more have signed our petition calling for tax transparency legislation for multinationals.

“Without action from our political leaders, these companies and individuals can continue to game the system and cheat some of the world’s poorest countries of vital tax revenue to fund public services and help people lift themselves out of poverty.”

Notes

Mauritius Leaks revealed that multinational corporations artificially but legally shifted their profits out of African countries where they do business to the corporate tax haven of Mauritius, where foreign income like interest payments are taxed at the very low rate of 3 percent. Unfair tax agreements signed between Mauritius and countries in Africa and Europe allow some companies to cut their tax bills even further.

Mauritius Leaks is a global investigation by the International Consortium of Investigative Journalists (ICIJ). For more details see: https://www.icij.org/investigations/mauritius-leaks/

Since 2014, a huge number of documents, including the Panama Papers and Paradise Papers scandals, have been leaked by ICIJ unveiling how tax evasion and avoidance have become standard business practice across the globe.

Countries from across the globe, including several African countries, are currently participating in a round of international tax negotiations under the OECD-G20 umbrella, including issues such as the introduction of a global minimum effective tax rate. To effectively curb profit shifting, countries must ensure the global minimum effective tax rate is set at an ambitious level and applied at a country-by-country basis without exceptions.

In 2016, Oxfam exposed Mauritius as one of the world’s 15 worst corporate tax havens in its report ‘Tax Battles.’ Download a copy of the report here.

On 28 May, 2019, the Tax Justice Network launched the Corporate Tax Haven Index (CTHI). Tax Justice Network Africa cited Mauritius as “among the most corrosive corporate tax havens against African countries”.

Company loans from Mauritius and nine other tax havens to African countries total over $80 billion. This means that for every $6 of foreign investment in Africa, $1 was a company loan from a tax haven. Two infographics detailing this information are available for download here.

Oxfam New Zealand has been campaigning for the New Zealand government to do more to stop tax avoidance to support poor countries and their people. A petition calling for legislation to be introduced requiring public, country-by-country financial reporting for all large multinational corporations has been signed by over 8600 people. For the Government’s recent consultation on options for taxing the digital economy, we helped over 430 people write a submission calling for New Zealand to advocate at the OECD-G20 level for a global minimum effective tax rate and other changes to the international tax rules.

Let’s even it up with rules for all

July 4, 2019

Here at Oxfam we work hard to beat inequality.

We do this because inequality perpetuates poverty, erodes trust, fuels crime, makes us unhappy, negates economic growth, and robs opportunities from people who are struggling to get by. It even cuts short people’s lives.

How can tax fight poverty

It might surprise you to know, but one of the most important things we can do to build an inclusive world of abundance is to transform our international tax system.

The tax system is how we share resources to get the big-ticket items that we all benefit from: roads, schools, police, teachers, public libraries, nurses, clinics, rubbish collection, safe water, and electricity. These are the public services that everyone makes use of, but that people who are poor rely on. Evidence tells us that the tax system can be a powerful tool to end inequality and poverty.

Making the rules fair for all

Our international tax rules say what multinational corporations can do and what governments can tax. They are old, dating back to WWII. Multinational corporations have found ways to game the rules to drain profits away from countries where they should contribute taxes, to countries where they contribute next to nothing.

Multinational corporations have also used countries’ need for investment as leverage to drive down corporate tax rates to the lowest they have ever been. This bad behaviour robs opportunities from people across the world.

Preparing for a more digital future

Meanwhile, our economies are changing. More and more of our lives are online: we buy and sell things and information; and we create value for corporations through sharing our own information. This digital economy makes it hard for people in government to get multinational corporations – including digital corporations – to make their fair contribution where they actually operate.

In response to this, representatives from 129 governments around the world – including New Zealand – are coming together to talk about how to fundamentally change the rules to make the international tax system fit for the modern world.

If governments get this right, we could see the end of shadowy corporate tax havens and the damaging race to the bottom on corporate tax. It could mark the beginning of a new tax era with fair taxes; where countries get what they need to nurture their people and the planet.

Four things have to happen.

One. Let all countries take part in decisions about international tax rules

When decisions are being made that impact on us, it is only right that we have our say.

Yet, for decades the Organisation for Economic Cooperation and Development (OECD) – a small club of only 36 wealthy countries, including New Zealand – has led decision-making about international tax rules. This has meant that countries that benefit from the rules have made the rules, leaving out countries that are poor.

This isn’t right, especially because countries that are poor rely most heavily on taxes from multinational corporations to provide services like health and education. They should be at the decision-making table.
The OECD has recently opened up to allow other countries to take part in decisions about international tax rules. But even now, only countries that have signed on to implement the OECD’s minimum tax standards are allowed to take part in decision-making. These 120 countries belong to what is called the ‘Inclusive Framework’. This means that many countries that are poor still don’t get a say in decisions about rules that impact on them.

Two. Simple rules that work for all

At the moment, the international tax system is incredibly complex. Even for New Zealand. When our people in parliament passed a law last year to help hold multinational corporations to account, the Specialist Tax Advisor said the legislation was “the most complex and technically challenging tax Bill that I have seen in the thirty years during which I have been a full-time tax professional”. *When an experienced tax accountant says something like this, you know it is bad.

Countries that are poor don’t have the resources to invest in sophisticated tax systems. This makes it more difficult for them to catch multinational corporations when they are gaming the rules and shirking from contributing their fair share. We need international tax rules that make the system simpler, not more complex. This will help us here in New Zealand, and also our neighbours across the Pacific region and beyond.

Three. Make rules that mean tax is paid where profits are made

For far too long, multinational corporations have been able to game the international tax rules to shift profits away from where they are made. They avoid contributing their fair share to the well-being of people in the countries where they make profits. It is time to make sure that the rules ensure all multinational corporations contribute their fair share, based on the actual profits they make in each country where they operate.

Four. Set a global minimum tax rate for multinational corporations

To beat inequality, we need a global minimum tax rate for multinational corporations – so they can’t get away with shirking their fair share. One way to stop multinational corporations driving corporate tax rates down and avoiding taxes across the world is for governments to agree on an ambitious minimum tax that all multinational corporations have to pay. This tax rate shouldn’t be too low – it needs to be set at a level that makes sure multinational corporations contribute their fair share in every country they operate. For this reason, the minimum tax rate also needs to be calculated at a country level – not just in the country where the multinational corporation has its headquarters.

*Turner, Therese, March 2018, Taxation (Neutralising Base Erosion and Profit Shifting) Bill, Report of the Specialist Tax Advisor to the Finance and Expenditure Select Committee, Turner & Associates: Wellington, Accessed on 2 September 2018 at: https://www.parliament.nz/resource/en-NZ/52SCFE_ADV_75623_942/041d34fc190035632c50dc2a00018cbee08b4fc7

NZ’s two richest men gain $1.1b while poorest Kiwis lose out

January 21, 2019

The two richest people in New Zealand added an astounding NZ$1.1 billion to their fortunes in 2017-2018, while the wealth of the poorest half of the country decreased overall, according to new Oxfam research to be released today.

The report also reveals that the richest 5% of the population collectively owns more wealth than the bottom 90%.

Oxfam’s research forms part of a global report released to coincide with this week’s annual meeting of the wealthiest and most powerful people in the world, as they gather at the World Economic Forum in Davos, Switzerland. Prime Minister Jacinda Ardern is scheduled to attend the meeting, which focuses on global politics, economics and social issues.

Published later today, the full report, Public Good or Private Wealth?, shows how the growing gap between rich and poor is undermining the fight against poverty, damaging local economies and fuelling public anger across the globe. The report reveals how governments are exacerbating inequality by, on the one hand, underfunding public services such as healthcare and education, while, on the other, under taxing corporations and the wealthy, and failing to clamp down on tax avoidance. The research also finds that consistently, women and girls are hardest hit by rising economic inequality.

Rachael Le Mesurier, executive director of Oxfam New Zealand, said: “We have a long way to go before we can say that every Kiwi is getting a fair go. We know inequality is harmful for us all. It perpetuates poverty, erodes trust, fuels crime, makes us unhappy, negates economic growth, and robs opportunity from the poorest – including shortening their lives. And women and girls suffer the most – across their lifetimes women have less opportunity than men to get paid work, they earn less and are less able to invest in assets.

“One of the key things we can do to tackle inequality here and across the world is to tax wealth more. Our taxes pay for schools, hospitals, and infrastructure such as communications and roads on which we all rely. Across the world, rich multinational corporations and extremely wealthy individuals are not paying their fair share. When big business and the super-rich don’t pay their fair share of tax, the rest of us pay the price – with kids without teachers, long waiting lists for health interventions, and not enough police in our communities.

“But to tax wealth more, we need to see it. We need more transparency in our tax system, both for multinational corporations and extremely wealthy individuals. We need more information in the public realm so that we can make sure that the wealthy pay their fair share – and that we grow a New Zealand where everyone gets a fair go in life.

“We are eagerly anticipating the release of the Tax Working Group’s final report early this year. As a country we’ve been talking about wealth taxes, such as capital gains, for some time now. To tackle the stubborn inequality that plagues ordinary, working Kiwis, we need to stop talking and start doing,” said Le Mesurier. “We hope the Tax Working Group takes this opportunity to recommend greater wealth taxes and more transparency, and we encourage the government to take the bold action necessary to reduce inequality”.

Notes to editors

Oxfam’s calculations are based on the most up to date, comprehensive data sources available. Figures on the share of wealth owned by the poorest half of humanity come from Credit Suisse Wealth Databook and relate to the period June 2017 – June 2018. Figures on the very richest in society are based on more detailed data from the annual Forbes ‘Billionaires List’ and relates to the period March 2017 – March 2018.
The two richest New Zealanders are Graeme Hart and Richard Chandler. They own wealth of US$10.1 billion and US$2.1 billion respectively. In 2016 Singapore-based Chandler was named as using Mossack Fonseca, the law firm at the centre of the Panama Papers tax avoidance controversy.

For more information or to arrange an interview please contact:

Kelsey-Rae Taylor | [email protected] | 021 298 5894

Billionaire fortunes grew by $2.5 billion a day last year as poorest saw their wealth fall

January 21, 2019

Billionaire fortunes increased globally by 12 percent last year – or US$2.5 billion a day – while the 3.8 billion people who make up the poorest half of humanity saw their wealth decline by 11 percent, reveals a new report from Oxfam today.

The report is being launched as political and business leaders gather for the World Economic Forum in Davos, Switzerland.

Earlier today Oxfam New Zealand reported that the two richest people in New Zealand added an astounding NZ$1.1 billion to their fortunes in 2017-2018, while the wealth of the poorest half of the country decreased overall by NZ$1.3 billion.

Public Good or Private Wealth shows the growing gap between rich and poor is undermining the fight against poverty, damaging our economies and fuelling public anger across the globe. It reveals how governments are exacerbating inequality by underfunding public services, such as healthcare and education, on the one hand, while under taxing corporations and the wealthy, and failing to clamp down on tax dodging, on the other. It also finds that women and girls are hardest hit by rising economic inequality.

Rachael Le Mesurier, Executive Director of Oxfam New Zealand, said:

“The size of your bank account should not dictate how many years your children spend in school, or how long you live – yet this is the reality in too many countries across the globe. While corporations and the super-rich enjoy low tax bills, millions of girls are denied a decent education and women are dying for lack of maternity care.”

The report reveals that the number of billionaires has almost doubled since the financial crisis, with a new billionaire created every two days between 2017 and 2018, yet wealthy individuals and corporations are paying lower rates of tax than they have in decades.

Getting the richest one percent to pay just 0.5 percent extra tax on their wealth could raise more money than it would cost to educate the 262 million children out of school and provide healthcare that would save the lives of 3.3 million people.
Just four cents in every dollar of tax revenue collected globally came from taxes on wealth such as inheritance or property in 2015. These types of tax have been reduced or eliminated in many rich countries and are barely implemented in the developing world.
Tax rates for wealthy individuals and corporations have also been cut dramatically. For example, the top rate of personal income tax in rich countries fell from 62 percent in 1970 to just 38 percent in 2013. The average rate in poor countries is just 28 percent.
In some countries, such as Brazil, the poorest 10 percent of society are now paying a higher proportion of their incomes in tax than the richest 10 percent.

At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. Every day 10,000 people die because they lack access to affordable healthcare. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family. In countries like Kenya a child from a rich family will spend twice as long in education as one from a poor family.

Cutting taxes on wealth predominantly benefits men who own 50 percent more wealth than women globally, and control over 86 percent of corporations.

Conversely, when public services are neglected poor women and girls suffer most. Girls are pulled out of school first when the money isn’t available to pay fees, and women clock up hours of unpaid work looking after sick relatives when healthcare systems fail. Oxfam estimates that if all the unpaid care work carried out by women across the globe was done by a single company it would have an annual turnover of $10 trillion – 43 times that of Apple, the world’s biggest company.

“People across the globe are angry and frustrated. Governments must now deliver real change by ensuring corporations and wealthy individuals pay their fair share of tax and investing this money in free healthcare and education that meets the needs of everyone – including women and girls whose needs are so often overlooked. Governments can build a brighter future for everyone – not just a privileged few,” added Le Mesurier.

Notes to editors

The report, methodology document explaining how Oxfam calculated the figures is available here. The data set is available on request.

Oxfam’s calculations are based on the most up to date, comprehensive data sources available. Figures on the share of wealth owned by the poorest half of humanity come from Credit Suisse Wealth Databook and relate to the period June 2017 – June 2018. Figures on the very richest in society are based on more detailed data from the Annual Forbes ‘Billionaires List’ and relates to the period March 2017 – March 2018.

Super-rich got 82% of wealth created last year – poorest half of world got nothing

January 23, 2018

Eighty two per cent of the wealth generated last year went to the richest one per cent of the global population, while the 3.7 billion people who make up the poorest half got nothing, according to a new Oxfam report released today.

The report is being launched as political and business elites gather for the World Economic Forum in Davos, Switzerland. Earlier today, Oxfam New Zealand reported that the richest 1 per cent of Kiwis bagged a staggering 28 per cent of all wealth created last year while the poorest 30 per cent of the population got just 1 per cent. ‘Reward Work, Not Wealth’ reveals how the global economy enables the super-rich to accumulate vast wealth at the expense of hundreds of millions of people who are struggling to survive on poverty pay. • 2017 saw an unprecedented increase in the number of billionaires, at a rate of one every two days. Billionaire wealth has risen by an average of 13 per cent a year since 2010 – six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 per cent. • It takes just four days for a CEO from one of the top five global fashion brands to earn what a Bangladeshi garment worker will earn in her entire lifetime. In the US, it takes slightly over one working day for a CEO to earn what an ordinary worker makes in a year. • It would cost $2.2 billion a year to increase the wages of all 2.5 million Vietnamese garment workers to a living wage. This is about a third of the amount paid out to wealthy shareholders by the top 5 companies in the garment sector last year. Oxfam’s report outlines the key factors driving up rewards for shareholders and multi-national corporate bosses at the expense of workers’ pay and conditions, particularly in developing countries. These include the erosion of workers’ rights, the excessive influence of multi-national big business over government policy-making, and the relentless corporate drive to minimise costs in order to maximise returns to shareholders. Oxfam has also highlighted the role of tax havens in helping the extremely wealthy become even richer, with multinational tax avoidance from corporations costing poor countries at least $100 billion each year. Furthermore, many of these companies are growing their profits at the expense of their workers – paying unfair wages and forcing them to work in gruelling conditions. Rachael Le Mesurier, Executive Director of Oxfam New Zealand, said: “The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system. The people who make our clothes, assemble our phones, and grow our food are being exploited to ensure a steady supply of cheap goods and swell the profits of multi-national corporations and billionaire investors.’ Women workers often find themselves off at the bottom of the heap. Across the world, women consistently earn less than men and are concentrated in the lowest-paid and least secure forms of work. By comparison, 9 out of 10 billionaires are men. “Oxfam has spoken to women across the globe whose lives are blighted by inequality. Women in Vietnamese garment factories who work far from home for poverty pay and don’t get to see their children for months at a time. Women working in the US poultry industry are forced to wear nappies because they are denied toilet breaks. Women working in hotels in Canada and the Dominican Republic who stay silent about sexual harassment for fear of losing their jobs,” said Le Mesurier. Oxfam is calling for governments globally to ensure our economies work for everyone and not just the fortunate few:

Limit returns to fair levels for shareholders and top executives and ensure all workers receive a minimum ‘living’ wage that would enable them to have a decent quality of life. For example, in Nigeria, the legal minimum wage would need to be tripled to ensure decent living standards.
Eliminate the gender pay gap and protect the rights of women workers. At current rates of change it will take 217 years to close the gap in pay and employment opportunities globally between women and men.
Ensure the extremely wealthy pay their fair share of tax through higher taxes and a crackdown on tax avoidance, and increase spending on public services such as healthcare and education. Oxfam estimates a global tax of 1.5 per cent on billionaires’ wealth could pay for every child in the world to go to school.
In New Zealand, demonstrate global leadership and work with political leaders to call for international tax reforms, including strengthening tax transparency for multi-nationals which is an essential step in fighting global tax avoidance.

Results of a new global survey commissioned by Oxfam demonstrates a groundswell of support for action on inequality. Of the 120,000 people surveyed in 10 countries, nearly two-thirds of all respondents think the gap between the rich and the poor needs to be urgently addressed. “It’s hard to find a political or business leader who doesn’t say they are worried about inequality. However there are not that many who are doing something about it. Many political leaders are actively making things worse by slashing taxes and scrapping labour rights,” said Le Mesurier. “People across the globe are ready for change. They want to see workers paid a living wage; they want multi-national corporations and the superrich to pay more tax; they want women workers to enjoy the same rights as men; they want a limit on the power and the wealth which sits in the hands of so few. They want action from their governments.” Notes to editors ‘Reward Work, Not Wealth’ and a methodology document that outlines how Oxfam arrived at the key statistics in the report, is available for download here. New data from Credit Suisse reveals that 42 people now own the same wealth as the poorest half of humanity. This figure cannot be compared to figures from previous years – including the 2016/17 statistic that eight men owned the same wealth as half the world – because it is based on an updated and expanded data set published by Credit Suisse in November 2017. When Oxfam recalculated last year’s figures using the latest data we found that 61 people owned the same wealth as half the world in 2016 – and not eight. Oxfam’s calculations are based on global wealth distribution data provided by the Credit Suisse Global Wealth Data book 2017. The wealth of billionaires was calculated using Forbes’ billionaires list last published in March 2017. RIWI and YouGov conducted the online survey for Oxfam in ten countries: India, Nigeria, United States, United Kingdom, Mexico, South Africa, Spain, Morocco, Netherlands and Denmark. For details on the methodology and the full results see Oxfam’s report Reward Work, Not Wealth.