Corruption and Tax Abuse Slow Action on Poverty and Climate Change
by FACTI Panel, agencies
Corruption and Tax Abuse Slow Action on Poverty and Climate Change, write Dalia Grybauskaite and Ibrahim Mayaki.
Cross-border corruption, financial crime and tax abuse are enormous burdens foisted on every country in the world today. The world's poorest countries are particularly hurt by such losses. Resources are swathed in secrecy and held out of reach from tax authorities and law enforcement.
The figures are jaw dropping. A tenth of the world's GDP may be held in offshore financial assets. Just one type of tax abuse–the shopping around for tax-free jurisdictions by multinational corporations–costs countries $500 to $600 billion a year. As much as 2.7 percent of the global GDP is laundered by criminals.
The abuses may be hidden, but their impact is clear: growing inequality and instability, the vast transfer of wealth from the poorest to the richest, weak governance entrenched and public services undermined. Illicit financial flows curtail countries' ability to finance sustainable development and improve the lives of ordinary citizens.
Looking at the estimates from the State of Tax Justice report published last year, the potential resource gains from just tax avoidance and evasion are enormous.
Better tax rules that end tax abuses could, for example, help Bangladesh more than treble its social safety net, and enable Canada to finance 14km of new mass transit extensions in Toronto every single year. Recovered resources in Germany could pay for thousands of wind turbines each year, while Gambia could build on the order of 6,500 wells for clean water access.
United Nations Secretary-General António Guterres has likened COVID-19 "to an X-ray, revealing fractures in the fragile skeleton of the societies we have built."
The pandemic has accelerated corruption and inequality. The U.N. Office on Drugs and Crime warns of increases in fraud, while the IMF has noted challenges to tax collection. Billionaires' wealth has soared by 27.5 percent while 131 million people were pushed into poverty due to COVID-19.
Fortunately, there is a clear and effective roadmap to tackle these overlapping challenges. We can now assess the limits of the web of existing international instruments and institutions developed to tackle tax abuse, money laundering and corruption.
Previous initiatives have tried to tackle these thorny issues, focusing on more discrete types of illicit financial flows, most often corruption, or made purely technical recommendations.
A FACTI Panel—including former world leaders and central bank governors, business and civil society heads and academics—tackles money laundering and corruption, tax evasion and aggressive tax planning in concert, offering a systemic reform package.
The Panel has no intention of its proposals devolving into empty slogans, but seeks swift actions. Most importantly, the Panel's approach is independent. It is not shackled by the demands of consensus building, which tends to lead to the lowest common denominator, in terms of outcomes.
There are now 14 concrete recommendations: including stronger laws and instruments to combat cross-border corruption and money laundering, action to tackle the bankers, lawyers and accountants who enable financial crime, strengthened transparency on ownership of companies and trusts and a global minimum tax on profits made by multinationals and digital giants. Stronger laws and institutions are needed to build a system of financial integrity for sustainable development.
We must have greater transparency around public spending, stronger international cooperation to prosecute bribery and global governance of tax abuse and money laundering. Those who enable financial crime must also face punitive sanctions. It's no longer adequate just to expose the kleptocrat stealing the peoples' wealth or the corporation evading taxes, but to ask who is allowing them to get away with it.
An international minimum rate for corporate tax will stop profit-shifting and harmful tax competition among countries. Fair taxation of digitalized economic activity means equitable treatment of digital and traditional businesses. This requires taxing multinational corporations based on global profit.
Such transformations will not come easily. We are calling for a Global Pact for Financial Integrity for Sustainable Development: one by which countries are determined to take ambitious and transformative action to strengthen financial integrity and agree that the additional resources released will be utilized, based on the priorities identified in their national development plans, to achieve sustainable development.
We must not be afraid of bold action, if we are to overcome both pandemic-related setbacks and existing systemic shortcomings.
If we act together and in solidarity with one another to fulfill our existing national and international commitments, and engage in new ones, a better world will come within reach.
* Dalia Grybauskaitė is the former president of Lithuania. Ibrahim Mayaki is the former prime minister of Niger.
* The FACTI Panel is the High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda. It aims to improve the world’s chances of achieving sustainable development by making recommendations that both strengthen current efforts to combat illicit financial flows, and close remaining gaps in the international system.
http://www.factipanel.org/report http://www.factipanel.org/news http://www.taxjustice.net/reports/the-state-of-tax-justice-2020/ http://www.icij.org/investigations/paradise-papers/lawyers-accountants-and-other-professionals-play-key-role-in-cross-border-financial-crime-oecd-warns-in-new-report/ http://www.transparency.org/en/news/cpi-2020-trouble-at-the-top
* June 2021: Civil Society agencies react to G7 Global Tax Proposal:
'Today’s deal is not historic or sufficient. ICRICT calls on G7 leaders to show real leadership and make a much more ambitious commitment': http://www.icrict.com/press-release/2021/6/5/todays-deal-is-not-historic-or-sufficient-icrict-call-on-g7-leaders-to-show-real-leadership-and-make-a-much-more-ambitious-commitment-j3nn4 http://taxjustice.net/2021/06/04/is-today-a-turning-point-against-corporate-tax-abuse/ http://bit.ly/3cwsVI6 http://www.oxfam.org/en/press-releases/g7-global-corporate-tax-deal-far-fair-oxfam
The Ultra-Millionaire Tax would bring in at least $3 trillion in revenue over 10 years - without raising taxes on the 99.95% of American households.
United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, Representative Pramila Jayapal (D-WA-07), a member of the House Budget Committee, and Representative Brendan Boyle (D-PA-02), a member of the House Ways and Means Committee today unveiled the Ultra-Millionaire Tax Act.
The Ultra-Millionaire Tax Act would level the playing field and narrow the racial wealth gap by asking the wealthiest 100,000 households in America, or the top 0.05%, to pay their fair share.
The Ultra-Millionaire Tax would bring in at least $3 trillion in revenue over 10 years - without raising taxes on the 99.95% of American households that have net worth below $50 million - according to a 2021 analysis from economists Emmanuel Saez and Gabriel Zucman from the University of California-Berkeley.
The bill would create a fairer economy through:
A 2% annual tax on the net worth of households and trusts between $50 million and $1 billion
A 1% annual surtax (3% tax overall) on the net worth of households and trusts above $1 billion
The Ultra-Millionaire Tax Act is cosponsored by Senators Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), Jeff Merkley (D-Ore.), Kirsten Gillibrand (D-N.Y.), Brian Schatz (D-Hawaii), Edward J. Markey (D-Mass.), Mazie Hirono (D-Hawaii.).
"The ultra-rich and powerful have rigged the rules in their favor so much that the top 0.1% pay a lower effective tax rate than the bottom 99%, and billionaire wealth is 40% higher than before the COVID crisis began. A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations," said Senator Warren.
"As Congress develops additional plans to help our economy, the wealth tax should be at the top of the list to help pay for these plans because of the huge amounts of revenue it would generate. This is money that should be invested in child care and early education, K-12, infrastructure, all of which are priorities of President Biden and Democrats in Congress. I'm confident lawmakers will catch up to the overwhelming majority of Americans who are demanding more fairness, more change, and who believe it's time for a wealth tax."
"As working families struggle to put food on the table, keep the heat on, and pay the rent during this devastating economic crisis that has caused the poverty rate to jump by the largest amount in at least 60 years, the rich have only gotten richer and the wealth of billionaires has jumped by 40%," said Congresswoman Jayapal.
"The Ultra-Millionaire Tax Act will help level the playing field, narrow the racial wealth gap, ensure the wealthiest finally begin to pay their fair share, and invest trillions of dollars into our communities so we can make a real difference in the lives of people across America."
"The hyper concentration of wealth among a tiny number of multimillionaires and billionaires is a crisis for American capitalism and the American Dream," said Congressman Boyle.
"Wealth inequality is at its highest level since the Gilded Age. The wealth share of the richest 0.1% has nearly tripled since the late 1970s. It is time for the ultra-millionaires to pay their fair share so that critical government programs can be bolstered to help the everyday American. Our proposal will make a meaningful difference in the lives of Americans who need the most help and bolster our country's shrinking middle class."
"When I was growing up, my dad's job as a union machinist was enough to buy a modest house, pay our family's bills, and take us on annual camping vacations. But since then, costs have gone through the roof and wages have stayed the same, making stories like my family's fewer and farther between," said Senator Merkley.
"The powerful and privileged have spent decades bending Congress around their wishes to give themselves tax giveaway after giveaway, while cutting investments in the things working families need to thrive, like living wage jobs, affordable health care, a good education, and a home they can afford. We need to level the playing field, and that means the richest of the rich must pay their fair share in taxes, just like working families already do."
"Wealth at the top has boomed during the COVID crisis. Billionaires' wealth has literally exploded while many Americans struggle with job and income loss. The ultra-millionaire wealth tax is the most direct and powerful tool to curb growing wealth concentration in the US and make sure the ultra-wealthy pay their fair share in taxes. It will also bring substantial and much needed tax revenue to address the many challenges the country is facing," wrote Emmanuel Saez and Gabriel Zucman, economists from the University of California-Berkeley
The Ultra-Millionaire Tax Act has been endorsed by: Action Center on Race and the Economy, AFL-CIO, American Federation of State, County and Municipal Employees (AFSCME), Americans for Financial Reform, Americans for Tax Fairness, Center for Law and Social Policy, Climate Hawks Vote, Communications Workers of America, Data for Progress, Democracy for America, Jobs with Justice, Justice Democrats, Indivisible, Institute for Policy Studies - Program on Inequality, Liberation in a Generation, National Domestic Workers Alliance, People's Action, Progressive Change Campaign Committee, Public Citizen, SEIU, Sunrise Movement, Take on Wall Street, Tax March, Unemployed Workers United, UNITE HERE, United for Respect, Working Families Party, Health Care for America Now.
"Wall Street billionaires have escaped paying their fair share of taxes for decades, thanks to laws they themselves have had an outsize influence in shaping. This bill requiring the ultrarich to pay some tax on their wealth, which was too often accumulated through predatory business models that extracted wealth from workers and communities, is an important step forward for economic justice," said Lisa Donner, executive director, Americans for Financial Reform.
"The Ultra-Millionaire Tax Act will narrow the country's extraordinary wealth gap, raise trillions of dollars from the super-wealthy and help fund the recovery our nation so desperately needs. We've calculated that U.S. billionaires have increased their wealth by nearly 50 percent since the pandemic began while tens of millions of people have lost their jobs, can't pay their rent, and go to bed hungry at night. We estimate the Ultra-Millionaire tax will raise $1.4 trillion from billionaires alone over the next 10 years; even more will be raised from the simply super-rich. That's why this legislation is critical to creating a fair-share tax system," said Frank Clemente, Executive Director, Americans for Tax Fairness.
"In the midst of a pandemic that has left millions of Americans economically devastated, the net wealth of America's billionaires has increased by over $1 trillion. Wealth inequality in the United States is out of control, with millionaires and billionaires becoming richer by the day as the American people struggle to get by with stagnant wages and a lack of adequate government support. Senator Warren's wealth tax would do more than almost any other plan to tackle this crisis of wealth inequality forcefully, directly, and effectively," said Morris Pearl, Chair of the Patriotic Millionaires.
"A tax on wealth above $50 million is very popular, and is even more popular when it funds priorities like child care, health care, and jobs in our communities. As President Biden calls for a Build Back Better plan that invests in American infrastructure and jobs, every senator should be proud to fund these investments by signing on to Senator Warren's wealth tax legislation," said Stephanie Taylor, PCCC co-founder.
"The pandemic has shone a harsh light on America's staggering inequalities-the fortunes of the richest Americans are ballooning while huge swaths of America suffer. It's time to level the playing field and passage of the Ultra-Millionaire Tax Act would be a monumental step toward addressing wealth inequality. 99.9% of Americans won't owe an extra dime in taxes under this proposal while the super-rich who have benefitted from a rigged system will finally start paying their fair share in taxes," said Susan Harley, managing director of Public Citizen's Congress Watch division.
"The wealth tax introduced today by Senator Warren and Representatives Jayapal and Boyle would help narrow the racial wealth divide in this country, at the same time as it raises money to invest in caregiving for our youngest and oldest Americans, rebuilding infrastructure, and paying for high quality k-12 education and tuition-free public college. At this moment in our history, it would be reckless not to pursue a policy that supports both of these goals," said Mandla Deskins of the Take on Wall Street campaign.
"Tax March started in a moment of national outrage at corruption and inequality, and has since grown into a national movement with a simple demand: Tax the rich. We're proud to support Sen. Warren and the bill's cosponsors as they fight to do exactly that. Right now, the American economy is at a crucial decision point between recovery and further disaster. To revive America's middle and working classes again, safeguard the country from future collapse, and build a new economy that truly works for everyone, Congress must tax the trillions of dollars in wealth hoarded by a few ultra-millionaires," said Tax March Campaign Director Dana Bye.
"The Ultra-Millionaire Tax Act will capture a portion of the tremendous windfall that billionaires have reaped during the pandemic. It will both restore lost fairness and progressivity to the U.S. tax system and will also slow the build-up of democracy-distorting concentrations of wealth and power," said Chuck Collins, Program on Inequality at the Institute for Policy Studies, and author of The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions.
http://www.warren.senate.gov/newsroom/press-releases/warren-jayapal-boyle-introduce-ultra-millionaire-tax-on-fortunes-over-50-million http://bit.ly/2PrJxrR http://bit.ly/3sF6eXL http://rooseveltinstitute.org/wp-content/uploads/2021/02/RI_Wealth-Tax-Constitutionality-Brief-202102-2.pdf http://inequality.org/great-divide/warren-wealth-tax/ http://www.icij.org/inside-icij/2021/04/us-tax-plan-proposes-massive-overhaul-to-audit-high-earners-and-corporations-for-tax-evasion/
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EU needs to reinvent itself to win fight against poverty
by Olivier De Schutter
Special Rapporteur on extreme poverty and human rights
The European Union must boldly rethink its socio-economic governance if it is to live up to its commitment to eradicate poverty, the UN Special Rapporteur on extreme poverty and human rights said at the end of an official visit to the EU’s institutions on Friday.
“While the EU has made recent progress in the eradication of poverty, it should not fall into complacency,” said Olivier De Schutter. “Its own commitment to lift 20 million people out of poverty by 2020 was largely missed. Since the EU has experienced steady economic and employment growth until very recently, the only explanation for this failure is that the benefits have not been evenly distributed. This is a defeat for social rights.”
One in five people, or 21.1 percent of the population, was at risk of poverty or social exclusion in 2019: this represents a total of 92.4 million people. A total of 19.4 million children, representing 23.1 percent, live in poverty across the Union, and 20.4 million workers live at risk of poverty. Women are disproportionately represented among the poor. Eighty-five percent of lone-parent families are led by women, and 40.3 percent of them are at risk of poverty.
The crisis triggered by the COVID-19 has affected many Europeans who had never experienced poverty before. “I have spoken with people who have experienced hunger for the first time, who have been exposed because they are homeless, and who are maltreated and abused because of poverty,” said De Schutter.
“The EU can play an important role in galvanizing Member States' anti-poverty efforts, notably through the yearly recommendations it issues to its Member States. But instead of prioritizing investments in healthcare, education, and social protection, these recommendations have often imposed budgetary cuts in the name of cost-efficiency. Since 2009, Member States have only decreased their investments in these areas critical for poverty reduction,” the UN expert noted.
The European Green Deal was presented at the end of 2019 by President von der Leyen as the new EU growth strategy. “The fight against poverty is the missing piece of this Green Deal. The Green Deal is supposed to combine environmental and social objectives, but as long as this good intention is not translated into concrete actions, millions will continue to struggle for a decent standard of living in a society that leaves them behind.”
De Schutter also highlighted that the inability of the EU to address the "race to the bottom” of Member States in the fields of taxation and worker protections undermines its anti-poverty efforts.
“Member States compete with each other in very unhelpful ways. They race to the bottom by lowering taxes, wages, and worker protections because they think that's how they can attract investors and improve external cost competitiveness. But undermining social rights not only violates international obligations, it is bad for enterprises, workers, and public coffers alike. Between €160-190 billion are lost each year from tax competition alone. This results in shifting the tax burden from large corporations and wealthy individuals onto workers and consumers.”
From 25 November to 28 January, the UN expert met with representatives from institutions such as the European Commission, the Council of the EU, the European Parliament, the European Labor Authority, the European Economic and Social Committee, the Fundamental Rights Agency, the European Central Bank and the European Investment Bank, as well as national or local representatives from France, Spain, Italy, and Romania.
He spoke with numerous civil society organisations representing younger and older adults, Roma populations, migrants, children, people with disabilities, as well as with people affected by poverty across these groups, and with social workers and social partners.
“I was impressed by the dedication of the officials with whom I met," De Schutter said. "But goodwill is not enough. If Europe wants to lead the way towards inclusive societies, it needs a bold EU-wide anti-poverty strategy that commits to reducing poverty by 50 percent equally across Member States by 2030.
“The current crisis is the chance for Europe to reinvent itself by placing social justice at its core. The presentation of the Action Plan to implement the European Pillar of Social Rights, which should include the Child Guarantee and a proposal to ensure adequate minimum incomes schemes are available across the EU, is an opportunity that should not be wasted." http://bit.ly/3cXEMA5
* Sep. 2020: A rights-based approach to social protection in the post-COVID-19 economic recovery: http://www.srpoverty.org/wp-content/uploads/2020/12/covid19.pdf http://www.srpoverty.org/ http://www.socialprotectionfloorscoalition.org/news/ http://www.developmentpathways.co.uk/news/action-against-hunger-recommends-a-bolder-approach-to-universal-social-protection/
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