The #ParadisePapers revealed a stunning amount of examples of international tax dodging – both by multinational corporations and private individuals. But where are we at – one year after the scandal?

Tax avoidance by multinational corporations

In summary, the international system for taxing multinational corporations is unchanged since the 2017 #ParadisePapers scandal.

In 2015, the OECD and G20 agreed a package of measures to combat corporate tax avoidance (the so-called Base Erosion and Profit Shifting (BEPS) package). But unfortunately, this package failed to solve the problem, and while some loopholes were been closed, others were opened up.[i]Therefore, we don’t have the necessary international standards to solve the problem of corproate tax dodging. Despite the #ParadisePapers, no major new international measures have been taken.

The #ParadisePapers clearly illustrated that multinational corporations adjust their tax strategies to changes in the tax standards, and continue to avoid paying their share of tax (see for example the #ParadisePaper stories on Nikeand Apple). This is made possible by the fact that governments around the world continue to offer harmful tax incentives, unjust tax treaties and secret transfer pricing deals with corporations, all of which undermines international tax justice. 

The problem if further exaccerbated by the digitalisation of the economy, which is affecting all sectors, and has opened up new gateways for multinationals to avoid tax. 

Meanwhile, corporate transparency remains at very low levels, and citizens are, for example, not allowed to know how much tax multinational corporations pay on a country by country basis.

Tax evasion by private individuals

As regards wealthy individuals who use international structures and tax havens to conceal wealth and dodge taxes, some important progress has been made since the #ParadisePapers. The European Union has decided to introduce public registers of the real (‘beneficial’) owners of companies in the EU. This is an important step forward in the fight to stop shell companies from being used to hide money. But more remains to be done – there are still many countries around the world that provide tax dodgers opportunities to hide their money. The international system for sharing information between tax administrations also still leaves room for improvement – in particular for the world’s poorest countries, which find it very hard to access the information they need to prevent international tax evasion by citizens from their countries.

Global Alliance for Tax Justice members and partner organisations around the world are planning the Global Days of Action to call on our governments to revitalise the efforts to make multinational corporations pay their share, and ensure funds raised through progressive tax policies are spent on ensuring quality public services for all.

Every dollar lost to corporate tax avoidance is a dollar that could have been invested in public services - to build hospitals, schools , affordable housing and public transportation systems, or to deliver clean water and sanitation. Large-scale corporate tax avoidance is fuelling poverty and increasing inequality across the world. Together we’re building public and political momentum globally by calling on decision makers to Make Multinationals Pay Their Share of Tax.

Here are five key steps that governments can take:

1. INTRODUCE TRANSPARENCY 

• Let the public see the truth about taxation of multinational corporations. ‘Public country-by-country reporting’would oblige multinational corporations to publish the top line figures showing the business activities they have, and how much tax they pay, in each country where they operate. Public country by country reporting has already been introduced for banks in the European Union, and the experience shows that this type of transparency makes it more difficult for multinational corporations to avoid taxation.[i]Therefore, governments should introduce public country by country reporting for all large multinational corporations. See thisbriefing on why public country-by-country reporting is a must.
• Publish the basic elements of all bilateral tax dealsbetween governments and multinational corporations, as well as a full overview of the costs and benefits of tax give-aways (incentives)provided to corporations.
• Protect whistleblowers who expose large-scale tax dodging. Global exposures about tax avoidance by multinational corporations have been made possible by whistleblowers who have taken action in the public interest to promote justice and reveal large-scale tax dodging. Today, whistleblowers are not protected from prosecution and risk facing severe penalties despite the fact that they act in the interest of the public (see also the #ParadisePapers Fact Sheet (insert link)).

2. ENGAGE IN TRULY GLOBAL COOPERATION

Support the establishment of an inclusive Intergovernmental Tax Commission under the auspices of the United Nations, where all countries have an equal say in setting international tax standards. In 2015, the OECD and G20 led the latest review of the international tax standards, known as the so-called Base Erosion and Profit Shifting (BEPS) package. More than 100 developing countries were excluded from the BEPS negotiations, which were also confidential to the public. A truly global and transparent intergovernmental UN tax commission is needed ensure that all countries can participate on an equal footing, and that citizens can hold their governments to account, with a view to reaching a global solution to the problem of international tax dodging. See also this briefing onwhy we need an intergovernmental UN Tax Commission.

3. REFORM THE CORPORATE TAX SYSTEM

• Stop harmful tax policiesand practices, including large-scale tax give-aways, patent boxes and secret bilateral deals between governments and multinationals, which allow corporations to avoid taxation. 
• Review tax treaties to identify those that facilitate international corporate tax avoidance, and remove or renegotiate such treaties. 
• Develop solid alternatives to the dysfunctional transfer pricing systemand its ‘arm’s length principle’. 

The efforts to halt international corporate tax avoidance should be part of a larger transition towards progressive tax systems, which effectively counter inequality.Governments must commit to ensuring that the increased revenue will be spent onquality public services for all, combatting inequality, empowering women and taking action to solve the climate crisis.