Bangladesh is losing more than $703 million every year because of tax abuses committed by multinational corporations and private individuals, according to a new report.
The State of Tax Justice 2020 report showed that the global tax abuse by multinational corporations costs the country $674 million annually. Another $29 million is lost due to tax avoidance by the individuals.
The loss is equivalent to 3.5 per cent of total tax revenue of Bangladesh, 61.89 per cent of the health budget and 13.95 per cent of the education spending.
In South Asia, Bangladesh is behind India, which loses $10.32 billion and Pakistan, which loses $2.53 billion, to tax evasions every year.
Sri Lanka loses $104 million, Nepal $9.26 million, the Maldives $686,744, and Bhutan $88,818.
The inaugural edition of the State of Tax Justice – an annual report by the Tax Justice Network on the state of global tax abuse and governments' efforts to tackle it, together with global union federation Public Services International and the Global Alliance for Tax Justice – is the first study to measure thoroughly how much every country loses to both corporate tax abuse and private tax evasion, marking a giant leap forward in tax transparency.
It said countries are losing more than $427 billion in tax each year to international corporate tax abuse and private tax evasion, costing countries altogether the equivalent of nearly 34 million nurses' annual salaries every year – or one nurse's annual salary every second.
The ground-breaking study reveals for the first time how much public funding each country loses to global tax abuse and identifies the countries most responsible for others' losses.
Of the $427 billion, $245 billion is directly lost to corporate tax abuse by multinational corporations and $182 billion to private tax evasion.
While higher-income countries lose more tax to global tax abuse, the report shows that tax losses bear much greater consequences in lower-income countries.
Higher-income countries altogether lose over $382 billion every year, whereas lower-income countries lose $45 billion. However, lower-income countries' tax losses are equivalent to nearly 52 per cent of their combined public health budgets. In contrast, higher-income countries' tax losses are equivalent to 8 per cent of their combined public health budgets.
Assessing which countries are most responsible for global tax abuse, the State of Tax Justice 2020 provides the strongest evidence to date that the greatest enablers of global tax abuse are the rich countries at the heart of the global economy and their dependencies – not the countries that appear on the EU's highly politicised tax haven blacklist or the small palm-fringed islands of popular belief.
Higher-income countries are responsible for 98 per cent of countries' tax losses, costing nations around the world over $419 billion in lost tax every year. Lower-income countries are responsible for just 2 per cent, costing countries over $8 billion in lost tax every year.
The five jurisdictions most responsible for countries' tax losses are British Territory Cayman (responsible for 16.5 per cent of global tax losses, equal to over $70 billion), the UK (10 per cent; over $42 billion), the Netherlands (8.5 per cent; over $36 billion), Luxembourg (6.5 per cent; over $27 billion) and the US (5.53 per cent; over $23 billion).
In a press release, Alex Cobham, chief executive of the Tax Justice Network, said: "A global tax system that loses over $427 billion a year is not a broken system, it's a system programmed to fail."
"Under pressure from corporate giants and tax haven powers like the Netherlands and the UK's network, our governments have programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else. The pandemic has exposed the grave cost of turning tax policy into a tool for indulging tax abusers instead of for protecting people's wellbeing."
"Now more than ever, we must reprogramme our global tax system to prioritise people's health and livelihoods over the desires of those bent on not paying tax."
The report called on governments to take three actions to tackle global tax abuse.
One of the actions is to introduce an excess profit tax on multinational corporations making excess profits during the pandemic, such as global digital companies, to cut through profit shifting abuses.
"Multinational corporations' excess profit would be identified at the global level, not the national level, to prevent corporations from underreporting their profits by shifting them into tax havens, and taxed using a unitary tax method."
It suggested the introduction of a wealth tax to fund the Covid-19 response and address the long-term inequalities the pandemic has exacerbated, with punitive rates for opaquely owned offshore assets and a commitment between governments to eliminate this opacity.
It called for establishing a UN tax convention to ensure a global and genuinely representative forum to set consistent, multilateral standards for corporate taxation, for the necessary tax cooperation between governments, and to deliver comprehensive, multilateral tax transparency.