It’s time to even things up
No matter where we live in this world, we all need the same things. We need a secure, warm house to live in, nutritious food to eat, safe water to drink, knowledge and skills to contribute to our communities, and decent work that lets us put food on the table and be home to enjoy it with our families.
For many people, this is not the case. Too many are being left behind. Research by Oxfam shows that last year, the 3.8 billion poorest people saw their wealth decline by 11 percent, while billionaire fortunes increased by 12 percent.
Income inequality is increasing within the majority of countries. Seven out of ten people live in a country where the gap between the incomes of the rich and the poor has increased over the last 30 years.
International tax rules fuel inequality, and inequality hurts us all
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.
The rules we’ve made for our international tax system fuel poverty and inequality. Wealthy people and multinational corporations use these rules to contribute less than their fair share of tax. This means less money for governments to invest in crucial public services, like clean water and hospitals.
Taxes are the best way to invest in the big-ticket items that reduce inequality: roads, schools, police, teachers, public libraries, nurses, rubbish collection, safe water, and electricity. These are the public services that everyone makes use of, but that people who are poor rely on. The tax system is how we share resources to get these things. Taxes form a common pool of resources that people in government use to help everyone.
But all across the world, multinational corporations don’t contribute their share to the common pool of resources in the countries where they operate. They use their power to avoid paying taxes to governments around the world; shirking their responsibilities and robbing from people living in poverty.
In fact, multinational corporations are now paying less tax than before the 2008 financial crisis, and they continue to shift up to 40 percent of their foreign profits to shadowy tax havens so they can avoid contributing where they should. This isn’t right.
Ministers Robertson and Nash want to hear your thoughts. They have issued a discussion paper on multinational corporations and the digitalisation of the economy. Read it here.
Our international tax system is based on rules created before World War One. These rules say what multinational corporations can do and what governments can tax. Right from the beginning, multinational corporations found ways to bypass these rules to drain profits away from countries where they have to pay tax.
Multinational corporations have also manipulated countries’ need for investment, to drive down corporate tax rates to the lowest they have ever been. This bad behaviour robs billions of dollars from governments around the world.
To make matters worse, our economies have changed and become more digitalised, meaning these international tax rules are now obsolete. Digital corporations, like the big tech giants, can avoid paying any taxes at all. In response to this, some governments decided to put their own digital services tax in place.
But the problem runs much deeper. We are doing more and more things online, including buying and selling things and information. As we do this, we are slowly building economies that are online only. This digital economy is virtual and makes it hard for people in government to make sure multinational corporations make a fair contribution to the countries where they operate.
To fix this system, we need to change the fundamental rules, not just add new ones.
And the OECD and 129 countries around the world – including New Zealand – are doing just that. These countries are joining together to modernise the rules that say how governments can tax multinational corporations. These discussions offer the potential to fundamentally change the rules to make the international tax system fit for our digital 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 the funds they are owed so they can eradicate poverty and inequality.
This is where you come in.
You can tell Ministers Nash and Robertson that you want an international tax system that is fit for our future and that is fair for everyone, everywhere.
- One. Let all countries take part in decisions about international tax rules
- Two. Simple rules that work for all
- Three. Make rules that mean tax is paid where profits are made
- Four. Set a global minimum tax rate for multinational corporations so they can’t get away with shirking contributing their fair share
To find out more, read our blog Let's Even It Up With Rules For All.
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:
Oxfam International executive director Winnie Byanyima and New Zealand prime minister Jacinda Ardern have met to discuss global and New Zealand issues including the upcoming national well-being budget and global inequality.
The world’s biggest pharmaceutical companies who are behind some of New Zealand’s most trusted brands – including Neutrogena, BAND-AID, Johnson’s Baby and Chap Stick - appear to be unfairly avoiding an estimated NZ$21million in tax per year in New Zealand, reveals new research from Oxfam today.