$32 trillion stashed offshore says UN report ISLAMABAD: A United Nations report has estimated that as much as $32 trillion is stashed offshore in secrecy jurisdictions, resulting in a loss of $3tr every year to governments due to tax evasion and tax avoidance schemes and with most perpetrators enjoying immunity.
“While the end of tax havens is not in sight, governments are gradually coming to realise that it is in their own interest to phase out secrecy jurisdictions,” according to the report by an international expert on the “Promotion of a democratic and equitable international order”.
“An international tax convention is necessary to stop competition among tax jurisdictions and abolish secrecy,” said Alfred de Zayas.
The report called for abolishing controversial deals and asked member states of the European Union to revise their code of conduct on business taxation to specifically prohibit “sweetheart” deals.
The report asked the International Monetary Fund, the World Bank and central banks to refuse loans to countries that harboured tax havens. No project should be subsidised if the enterprises involved used secrecy jurisdictions.
Parliaments should exercise their monitoring functions regarding the human rights impacts of fiscal policies.
Domestic banks should investigate the origin of the deposits and investments they administer and return illicit funds held by corporations and kleptocrats to the countries of origin. The International Court of Justice should issue an advisory opinion, holding that tax havens are contra bonos mores, that is, against moral welfare of society.
De Zayas’ report said that taxation should be used to advance human rights. Fiscal and budgetary policy should be reformed with a view to achieving fair taxation by abolishing tax havens and ‘sweetheart’ deals, closing loopholes and rejecting contra bonos mores schemes.
Progressive redistributive taxation polices would produce funding for vital public services that would reduce inequality and poverty and lead to sustainable development, it said.
The report noted that tax avoidance, tax evasion and tax havens deprived countries of revenues needed to fulfil human rights treaty obligations, alleviate poverty, improve the administration of justice, ensure that remedies were available to victims of human rights violations, build infrastructure, create jobs, and provide social security, quality health services and free education.
While the report emphasised the need for establishment of an intergovernmental tax body under the auspices of the United Nations — with the mandate to elaborate a convention on taxation and international cooperation in tax matters — De Zayas urged UN Secretary General Antonio Guterres to convene an international conference on tax avoidance and evasion, the abolition of tax havens and protection of whistleblowers.
The report urged civil society organisations to call for more “direct democracy” in matters such as taxation. They should demand participatory democracy and expose so-called “representative democracy” when it ceases to represent voice of the people and becomes subservient to corporate lobbies.
They should demand referendum on important issues, including a financial transactions tax, the outlawing of tax havens and runaway military expenditures, the report said.
The report also highlighted the Tax Justice Network Financial Secrecy Index, which ranked jurisdictions according to their secrecy and the scale of their offshore financial activities.
The top three jurisdictions listed last year were Switzerland, Hong Kong and the United States. Other “high-profile jurisdictions” listed included the United Kingdom and its territories and dependencies, Luxembourg, the Netherlands, Belgium, Malta, Cyprus, Singapore, Liberia and Panama.
According to the Tax Justice Network, illicit cross-border financial flows have been estimated at $1.6tr per year, dwarfing the $135 billion devoted globally to foreign aid.
It is estimated that since the 1970s African countries alone have lost over $1tr in capital flight, while combined external debts are less than $200bn.