The world is not short of wealth. The size of the global economy has almost quintupled over the past 30 years. In 2017, its value reached nearly $78 trillion.
Yet, the gap between rich and poor gets wider, with a massive increase in wealth at the top, while the total wealth owned by those at the bottom is falling. Since 2015, the richest 1% have more wealth than the rest of the world combined.
Such extreme economic inequality is being fuelled by unfair tax practices that have reached an unprecedented scale. And it’s the world’s poorest people who suffer the most. Governments urgently need to tackle tax dodging to help put an end to global poverty.
The Big Winners in Tax Dodging
The big winners are those at the top, the wealthy individuals and multinational corporations who use their position and influence to capture economic gain for themselves and use economic structures to their benefit.
Those who should be paying the most tax instead maximize their profits in part by paying as little tax as possible. They do this by using tax havens or by making countries compete to provide tax breaks, exemptions, and lower rates.
The Big Losers in Tax Dodging
When rich individuals or multinational corporations stash their wealth in tax havens, they can dodge paying their taxes in the countries where they do business and where they make their money. By doing so they deprive governments of the resources they need to provide vital public services and infrastructures like schools, hospitals and roads, and to tackle poverty and inequality.
Governments either have to cut back on these services, or make up the shortfall by collecting higher taxes from everyone else. Both options see the poorest people lose out and the inequality gap grow. This global system of tax avoidance is sucking the life out of welfare states in the rich world.
But the impact is even more devastating in poorer countries: