Country loses $355m annually in taxes

Real loss far outstrips off-the-cuff amount found: Economist

Doulot Akter Mala | Published: November 19, 2024 23:15:17

Bangladesh loses US$355 million in taxes annually as multinational corporations and individual tycoons are parking funds in tax havens to underpay tax, reveals a report on capital flight.
The report, launched Tuesday by Tax Justice Network, says tax loss has declined in recent findings from a height of $396.9 million cited in its 2023 report on state of justice.
The 2024 edition of the network report titled 'The State of Tax Justice' has outlined $101,385.4 million worth of annual tax loss incurred in Asia.
The amount of taxes could be mobilized if the assets worth $1.2 billion had not been siphoned off the country, an FE analysis shows.
Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), says the actual amount of tax loss is much higher than that of the reported one as it is difficult to trace the siphoned-off assets to quantify.
"Our tax-to-GDP ratio is poor as the well-off have been involved in siphoning money. Time has come to take action through lodging cases in criminal court to return the wealth as well as civil court to claim the dodged taxes," he suggests.
The recent report reveals the amount is equivalent to 21.4 per cent of country's health expenditure that year which was 25.5 per cent in 2023 report.
Of the amount of tax loss, $335.9 has been lost due to corporate-tax abuse while $ 19.1 million for tax abuse due to offshore wealth.
The network has found the countries losing US$492 billion in taxes a year to multinational corporations and wealthy individuals using tax havens to underpay tax.
"Nearly half the losses (43 per cent) are enabled by the eight countries that remain, as of writing, opposed to a UN tax convention: Australia, Canada, Israel, Japan, New Zealand, South Korea, the UK and the US," the report reads.
This report, the State of Tax Justice 2024, is published at a vital moment for global progress - "the greatest opportunity in a century to curb cross-border tax abuse is almost upon us, and this report provides a comprehensive overview of the nature and scale of the problem facing each country".
The State of Tax Justice 2024 finds that global revenue losses due to cross- border tax abuse amount to an annual US$492 billion, made up of US$347.6 billion due to corporate tax abuse by multinational companies, and US$144.8 billion due to undeclared offshore assets of wealthy individuals.
Of the US$492 billion lost to global tax abuse a year, two-thirds (US$347.6 billion) are lost to multinational corporations shifting profit offshore to underpay tax.
The remaining third (US$144.8 billion) is lost to wealthy individuals hiding their wealth offshore.
The biggest enablers of global tax abuse are also some of the biggest losers as US$177 billion lost by the 8 countries that voted against UN tax-convention terms in August 2024, while US$189 billion lost by 44 those that abstained and US$123 billion lost by 110 countries voting for.
"Multinational corporations are shifting more profits into tax havens and underpaying more on tax, evidencing failure of OECD's tax-reform attempts," it says.
Multinational corporations "cheated" more after tax-rate cuts, disproving "tax appeasement" thinking popular with lobbyists and some politicians
Offshore tax evasion by wealthy individuals dropped, but by far less than claimed. Majority of wealth offshore still hidden from tax authorities.
The Tax Justice Network is urging all countries to vote in favour of the negotiations to accept UN tax convention, in order to plug the drain on funds.
"It is vital that over the crucial next phase, we engage with a collective focus. Our governments - from countries in the global North as well as the South - must be encouraged at every opportunity to commit capacity to the process, and to align their positions and ambition with the hopes and aspirations of their people for better lives, for which tax justice is a core tool," said Irene Ovonji-Odida, Chair, Tax Justice Network.
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