The 30th edition of the Global Financial Centres Index 30, was published today by Z/Yen Group in partnership with the China Development Institute (CDI). The launch webinar for GFCI 30 linked London and Busan.
New York held onto the top position in the index and has now been in first place for three years.
London remained in second place, while Hong Kong and Singapore in third and fourth position both fell 25 points in the ratings.
Overall the average rating fell 12.9 points (2.05%). While a small change, this is the third consecutive fall in the average rating.
The fact that overall ratings continue to fall against the levels that we saw in 2019 reflects the continuing uncertainty around international trade, the impact of the covid-19 pandemic, and geopolitical and local unrest.
Asia/Pacific centres generally fell in the ratings in GFCI 30, and assessments from people based in Asia/Pacific suggest that they judge Chinese centres in particular less favourably than before. This might suggest that the economic gains in the region arising from covid-19 may be levelling off.
North American centres performed well in GFCI 30. This is likely to reflect renewed optimism about the US and Canadian economies as they move forward from the pandemic.
The relatively strong performance of New York and London suggests that the financial services sectors in these cities managed to sustain their performance despite radical changes in working practices during the last 18 months.
Kigali and Lagos join the index for the first time, recognising the growth of financial services in Africa.
The top 20 centres in GFCI 30 are shown in the table below.
FinTech
New York and Shanghai retained first and second positions in the GFCI 30 FinTech ranking, with London rising two places to third place.
In the top 40 positions, Western European centres performed well, with most gaining rank position.
Professor Michael Mainelli, Executive Chairman of Z/Yen, said:
We see two patterns in the results for GFCI 30 – confidence in the recovery of the North American and Western European economies following the shock of 2020; and a levelling off following the rapid rise of Asia/Pacific centres and their economic stability in the covid-19 pandemic. Competition remains tight. Outside the top two centres, only five points on a 1,000 point scale separate the centres ranked third to eighth.
On World Democracy Day, September 15, 2021, the Ghana Center for Democratic Development (CDD-Ghana) and Democracy in Africa (DIA) release two major reports about the capture of supposedly democratic political systems by private networks that work in their own interest, rather than that of the public.
The reports also demonstrate that the extent of democracy capture varies significantly. It is relatively lower or less pronounced in countries such as Ghana, with an experience of multiple transfers of power through competitive elections, and much higher in states such as Zimbabwe where the government has never changed hands. The shape that networks take also varies tremendously and no two shadow states are the same:
In Uganda, the shadow state is run by an axis of President Museveni’s family and the country’s “military aristocracy”, along with a select number of interlocutors in the business community.
In Benin, things look very different, as President Patrice Talon has exploited the weakness of the legal system, the judiciary and the legislature to turn one of the continent’s most vibrant democracies into a near one-party state.
In the DRC, the international military alliances around former President Joseph Kabila played a critical role in creating a shadow state that was intimately connected to transnational smuggling networks.
In Zambia, the security forces have been less relevant and instead democracy capture has been driven by the nexus between civilian politicians, government officials, and private businessmen.
In Zimbabwe, the importance of the military has grown since the early 2000s, penetrating further areas of the state and the economy, raising questions about whether President Emmerson Mnangagwa or army leaders really hold power.
Understanding how democracy is captured is critical because it helps to explain the lack of progress in many countries towards democratic consolidation, how poorly performing governments are able to remain in power, why development programmes often fail to meet the needs of ordinary citizens, and why the gap between the “haves” and “have nots” continues to grow.
Key insights and findings include:
The way that “billionaire judges” in Nigeria make fortunes by taking bribes to exonerate political leaders and criminal organizations, facilitating corruption and creating a culture of impunity that undermines both democratic accountability and the rule of law.
How security officials, bank managers, electoral officials, judges and journalists collude with members of the ruling party to prevent opposition parties from being able to effectively campaign in elections in countries such as Mozambique, Uganda and Zimbabwe, preventing a transfer of power.
The way the police and military in the DRC set up command posts near newly productive mining shaft, not to protect workers but instead to issue unofficial “taxes”, so that some mine operators have to pay 40 regular fees – only 9 of which are official levies of the national government.
How companies with connections to the ruling party and the military in Zimbabwe have used their connections to artificially create a fuel shortage that has enabled them to inflate their prices at the expense of motorists, creating major challenges for businesses and ordinary citizens.
The way that Presidents such as Uganda’s Yoweri Museveni issue tax waivers to their business allies in return for financial contributions to their election campaign “war chest”, denying the Treasury hundreds of millions of dollars in revenue, and reducing the funds available for health and education.
How the partial capture of democracy in Ghana has contributed to the emergence of a distinctive class of super privileged Ghanaians, who have become rich in part due to their privileged access to the state, including governing and opposition party politicians and their cronies in the business sector and leadership of state bureaucratic and parastatal agencies.
According to Professor H. Kwasi Prempeh, Executive Director of CDD-Ghana, “Rather than a government of the people, by the people and for the people, democracy in Africa, including the legitimacy it confers on governments, appears captured to serve interests other than the people’s, thus leaving many people increasingly questioning democracy’s relevance. The future of democracy in Africa depends on our ability to reverse this picture.”
On his part, Nic Cheeseman, Professor of Democracy at the University of Birmingham said, “the growth of shadow states – powerful networks of unelected individuals that use their access to the government to pursue their own interests at the expense of the public – represents the most significant political challenge facing African countries today, and is the root cause of the democratic backsliding that we have seen in many states over the last ten years”.
John Githongo, a noted Kenyan anti-corruption campaigner was also of the view that “these reports represent the most comprehensive and insightful analysis of the way that democracy and economic and subverted in Africa available to date. They reveal that shadow states and democracy capture are the root causes of corruption, inequality and development failure.”
The countries covered in this project include Benin, the Democratic Republic of Congo, Ghana, Kenya, Mozambique, Nigeria, Uganda, Zambia, and Zimbabwe.
Democracy Capture in Benin, Ghana, Kenya, Mozambique, and Nigeria
The Shadow State in the Democratic Republic of Congo, Uganda, Zambia, and Zimbabwe
Italy has been exposed at the heart of an ongoing trade in illicit timber from Myanmar, in defiance of both EU trade regulations and sanctions imposed in response to the violent military coup earlier this year.
In this report, EIA identifies a total of 27 Italian timber traders importing teak timber products.
The payments industry has undergone rapid innovation as spending has shifted online. This has facilitated new systems with customer convenience at their heart but also led to a rise in fraud and scams that the industry is trying to address.
Nespresso launched KAHAWA ya CONGO – a smooth and fruity organic coffee made possible only through the unique brand’s Reviving Origins program, which aims to revitalize coffee production in regions impacted by adversities ranging from climate change to conflict. The first organic blend under the Reviving Origins program, KAHAWA ya CONGO, is from the Lake Kivu region, where the once-thriving coffee farming community has been devastated by decades of political and economic instability.
Since its launch in 2019, the Reviving Origins program has enabled the production of exquisite coffees from areas of Zimbabwe, Uganda, Colombia and now, the DRC, to become available as seasonal coffees for Nespresso coffee drinkers.
In 1980, coffee was the second most important export for DRC and ranked among the world’s finest but declined in the early 2000s due to years of instability that had a devastating impact on the industry. Volumes have since dropped by 10 times.
Nespresso, together with global non-profit TechnoServe, the U.S Agency for International Development (USAID) and coffee trader Virunga Coffee/Olam International, is working with 2,500 farmers in South Kivu to improve coffee quality and yield, and embed sustainable farming practices, while increasing incomes. Nespresso is also in the process of expanding the program across North Kivu to potentially include up to 1,700 organic certified farmers.
Paulo Barone, Head of Coffee Sustainability and Origins Development at Nespresso, said: “Kivu has the potential to be among the world’s great coffee regions but has faced extremely challenging conditions in recent years. Through our Reviving Origins program, we’re working closely with Congolese farmers to revitalise the sector, restore Kivu as a leading source of high-quality, exceptional Arabica coffee and rebuild sustainable livelihoods, while bringing vital social support to enhance the welfare of the communities behind our KAHAWA ya CONGO coffee.”
Paul Sabatine, Mission Director for USAID/Democratic Republic of the Congo, said: “Nespresso’s partnership with USAID to revitalize DRC’s coffee sector is critical for Congolese farmers, who now have better coffee quality, improved productivity and higher incomes. Communities have experienced stronger economic development due to the partnership, in a region where absence of sustainable livelihoods fuels conflict. We look forward to a continued collaboration with Nespresso as we jointly seek to improve farmers’ livelihoods.”
Will Warshauer, President and CEO of TechnoServe, added: “This coffee represents the incredible spirit of Congolese farmers who have overcome so much to build a better life for their families. In working with these farmers to improve their coffee crops, TechnoServe has seen how dedicated buyers like Nespresso, who pay higher prices for higher quality, can transform the livelihoods of thousands of people in this conflict-affected region. We’re looking forward to a bright future for Congolese coffee and for the hardworking farmers who produce it.”
Kivu coffee farmer, Turanyi Kabasura, said: “I see my remaining days being better than those in the past, because I am going to work, assured of receiving regular pay and a bonus each time after the coffee sale. In my whole life, no one has ever given me such a bonus. I can use that to develop other strategies, such as raising small livestock, or my wife can run a small business. I am starting to see the results of my work.”
REVIVING COFFEE AND COMMUNITIES IN KIVU
In Kivu, decades of conflict have led to many farmers fleeing their homes, and the region continues to face significant economic and healthcare challenges. Today, 58% of households in DRC lack access to clean water systems, and 15% of children do not reach their 5th birthday, with preventable and treatable diseases such as water-borne illnesses, acute respiratory infections and malaria among the leading causes.
In partnership with the Eastern Congo Initiative (ECI), Nespresso is investing CHF 1 million to support the establishment of 23 water access points across the region, in addition to one primary and five mobile health clinics, which will deliver 13,000 health consultations per year to local communities, helping in the fight against cholera, a major health issue in the country.
Abraham Leno, ECI Executive Director, said: “Eastern Congo has suffered through decades of fighting. During those years in addition to terrible loss of countless people, the economy collapsed and public institutions’ capacity to care for the people of Congo was greatly depleted. But farmers kept working their fields and tending their coffee trees, because they knew that it was their path to a brighter future for their families. That is the true spirit of Congo. Nespresso’s funding of Asili, the social enterprise powered by ECI, will help farmers secure that future – building meaningful livelihoods and bringing world-class essential services, like clean drinking water and affordable healthcare, to families. It’s transformational change like this that allows hope to flourish and communities to heal.”
Nespresso’s unique sustainable sourcing model in coffee producing countries, the Nespresso AAA Sustainable Quality™ Program, provides the foundation for its work in Reviving Origins regions and involves more than 120,000 farmers across the world. Overall, Nespresso is investing a total of CHF 10 million in the Reviving Origins program over a period of five years (2019-2023).
KAHAWA ya CONGO is available online and at Nespresso boutiques, alongside Reviving Origins coffees AMAHA awe UGANDA, TAMUKA mu ZIMBABWE and ESPERANZA de COLOMBIA – returning for 2021. The long-term objective of the Reviving Origins program is to establish these under-threat coffees as permanent blends, available all year round for consumers.
KAHAWA ya CONGO: “Hope of Congo”
The rain-rich volcanic soils along the Kivu lakeshores of Eastern Congo provide an ideal environment for growing specialty Arabica coffee. The first organic coffee in the Reviving Origins range, KAHAWA ya CONGO is a smooth, seasonal coffee with a mild, fruity note, and alluring sweet cereal and nutty aromas.
A report published today by The Sentry, “Shadows and Shell Games: Uncovering an Offshore Business Empire in Zimbabwe,” reveals key details of the business practices of controversial businessman and presidential advisor Kudakwashe Tagwirei.
The Sentry’s investigation reveals that Tagwirei, who has been followed by allegations of corruption and cronyism for years, has been using complex corporate structures and seemingly preferential government treatment to build his business empire and enormous wealth. The tycoon now presides over a sprawling network of more than 40 companies spanning the oil, mining, banking, logistics, transportation, and import/export sectors. The report details how Tagwirei has effectively concealed his control over this empire through an elaborate foreign network, hiding his wealth and ownership through offshore financial structures.
Economic Impact of the Pandemic and Policy Responses. Mauritius has been successful in containing the COVID-19 pandemic thanks to strict health measures but the halt in tourism has significantly affected its tourism-dependent economy. A comprehensive set of stimulus measures to mitigate the economic impact of the pandemic, including a wage subsidy and income support for the self-employed, have provided support to firms and households.
Environmental crime – such as forestry crime, illegal mining and waste trafficking - is an extremely profitable criminal enterprise, generating billions in criminal gains each year. It fuels corruption, and converges with many other serious and organised crimes, such as tax fraud, drug trafficking and forced labour.
Environmental crime is a ‘low risk, high reward’ crime. Across many countries, light sanctions for environmental crimes alongside limited efforts to follow and remove the profits, make this is a lucrative but safe source of income for criminals. The FATF therefore conducted this study to increase understanding of the scale and nature of money laundering threats from environmental crime and to strengthen the response across public and private sectors. The G20 Finance Ministers and Central Bank Governors have similarly recognized the need to strengthen action, and the importance of FATF’s role in supporting biodiversity aims.
Building on the FATF’s 2020 report on money laundering from the illegal wildlife trade, this report shows that criminals are making enormous profits by using front companies to mix legal and illegal goods and payments early in the resource supply chains. They also rely on corruption, trade-based fraud, and offshore corporate structures to conceal the ultimate criminals benefitting from these crimes.
As a priority, countries should:
The private sector also has an important role in detecting financial flows from environmental crimes. The FATF’s study identifies good practices and risk indicators to help financial and non-financial sectors detect potential cases.
Going forward, FATF will continue its focus on environmental crime, including exploring whether further policy work is needed. In September 2021, FATF plans to hold a public webinar for non-government stakeholders to discuss the findings of this new study.
After the “unprecedented” year that was 2020, Q1 of 2021 has been fast and furious for both ThoughtLeaders4 FIRE and the Asset Recovery Community.
As office doors creak open, wingtips start to hit the pavements and signs of life cautiously return to London, our authors review this quarter with one eye firmly fixed on the future.
The twenty-ninth edition of the Global Financial Centres Index (GFCI 29) was published on 17 March 2021. GFCI 29 provides evaluations of future competitiveness and rankings for 114 financial centres around the world. The GFCI serves as a valuable reference for policy and investment decision-makers.
China Development Institute (CDI) in Shenzhen and Z/Yen Partners in London collaborate in producing the GFCI. The GFCI is updated and published every March and September, and receives considerable attention from the global financial community.
126 financial centres were researched for GFCI 29 of which 114 are now in the main index. The GFCI is compiled using 143 instrumental factors. These quantitative measures are provided by third parties including the World Bank, the Economist Intelligence Unit, the OECD and the United Nations.
The instrumental factors are combined with financial centre assessments provided by respondents to the GFCI online questionnaire. GFCI 29 uses 65,507 assessments from 10,774 respondents.
The results of GFCI 29 include:
Leading Centres
Western Europe
Asia/Pacific
North America
Eastern Europe & Central Asia
Middle East & Africa
Latin America & The Caribbean
FinTech
Jamaica’s Blue Mountains – steep slopes, volcanic soils, and island mists – are ideal Arabica terroir. This controlled designation of origin ships their treasured beans in iconic handmade wood barrels. The exotic woody and rich spice notes of this rare crop make JAMAICA BLUE MOUNTAIN worthy of its protected name.
ORIGIN
Arabica bean from the steep slopes and volcanic soils of Jamaica’s Blue Mountains.
ROASTING
The treasured Jamaica Blue Mountain beans get a split roast. Both splits are darker roasts – it develops intensity while balancing the flavor. The second split takes a little longer and that builds the coffee’s intensity without pushing the bitter note too far.
AROMATIC PROFILE
Exotic woody notes mark this Limited Edition espresso. This Jamaican treasure carries a pleasantly spicy aftertaste – hints of pepper, cinnamon and nutmeg lingering long after the last sip.
Coffee lovers eager to discover the diverse coffee tastes of the world can now enjoy Nespresso World Explorations. The coffee range builds on the popular Lungo collection which showcases distinct coffees inspired by the cities of Cape Town, Tokyo, Stockholm and Vienna, with the addition of two new cups inspired by Shanghai and Buenos Aires.
Inviting consumers on a journey that will enhance their tastes and enrich their coffee knowledge, the World Explorations range features the intense Cape Town Envivo Lungo and Stockholm Fortissio Lungo, as well as the more balanced Vienna Linizio Lungo and Tokyo Vivalto Lungo, with two new mild cups, Shanghai Lungo and Buenos Aires Lungo, inspired by the flavour profiles typical of these Asian and South American cities.
Celebrating traditional coffee moments from around the world like the Viennese coffee house culture, where coffee becomes part of a special trip and is enjoyed idly from morning ‘til night, or Argentina’s Merienda coffee break, observed late in the afternoon alongside sweet and savoury snacks, Nespresso World Explorations captures the sensations, tastes and aromas of some of the world’s most admired cities.
World Explorations Shanghai Lungo
World Explorations Buenos Aires Lungo
In a nod to Argentina’s vibrant food scene where sweetness prevails, Nespresso’s World Explorations Buenos Aires Lungo blends a gently roasted Colombian Arabica with Ugandan Robusta, to deliver distinct cereal and sweet popcorn notes. Paying tribute to the city’s love for smooth long cups characterised by a sweet, milky flavour, it is best served with a generous drop of milk and sugar.
World Explorations Cape Town Envivo Lungo
Reflecting South Africa’s preference towards Asian coffees, which have shaped local tastes over time, Nespresso’s World Explorations Cape Town Envivo Lungo blends Indian Arabica and Robusta to deliver an intense and full bodied Lungo with a punchy, bitter note and woodsy aroma. Unfold the coffee’s smooth roasted notes with a splash of milk to enjoy it like a local.
World Explorations Stockholm Fortissio Lungo
Taking consumers on a leisurely wander through Stockholm, Nespresso’s World Explorations Stockholm Fortissio Lungo recreates the aromatic profile of a Swedish coffee by coupling Monsooned Malabar with Colombian Arabica for an intense, sweet cup with a hint of bitterness. To taste this cup like a true Swede, we suggest serving this flavourful coffee with friends and family over a plate of cinnamon rolls.
World Explorations Tokyo Vivalto Lungo
World Explorations Vienna Linizio Lungo
Taken from Vienna’s coffeehouse tradition, Nespresso World Explorations Vienna Linizio Lungo pays homage to the many recipes and smoothness of Viennese coffee, pairing sweet Brazilian and Colombian Arabicas, lightly roasted by our experts to enhance the malty and aromatic notes in the cup. For an authentic coffee experience, this Lungo is suggested to be topped up with hot water for an even longer cup and served with a slice of cake.
Countries are losing a total of over $427 billion in tax each year to international corporate tax abuse and private tax evasion, costing countries altogether the equivalent of nearly 34 million nurses’ annual salaries every year – or one nurse’s annual salary every second. As pandemic-fatigued countries around the world struggle to cope with second and third waves of coronavirus, a ground-breaking study published today reveals for the first time how much public funding each country loses to global tax abuse and identifies the countries most responsible for others’ losses. In a series of joint national and regional launch events around the world, economists, unions and campaigners are urging governments to immediately enact long-delayed tax reform measures in order to clamp down on global tax abuse and reverse the inequalities and hardships exacerbated by tax losses.
The inaugural edition of the State of Tax Justice – an annual report by the Tax Justice Network on the state of global tax abuse and governments’ efforts to tackle it, published today together with global union federation Public Services International and the Global Alliance for Tax Justice – is the first study to measure thoroughly how much every country loses to both corporate tax abuse and private tax evasion, marking a giant leap forward in tax transparency.
While previous studies on the scale of global corporate tax abuse have had to contest with the fog of financial secrecy surrounding multinational corporations’ tax affairs, the State of Tax Justice analyses data that was self-reported by multinational corporations to tax authorities and recently published by the OECD, allowing the report authors to directly measure tax losses arising from observable corporate tax abuse. The data, referred to as country by country reporting data, is a transparency measure first proposed by the Tax Justice Network in 2003. After nearly two decades of campaigning, the data was made available to the public by the OECD in July 2020 – although only after multinational corporations’ data was aggregated and anonymised.
Of the $427 billion in tax lost each year globally to tax havens, the State of Tax Justice 2020 reports that $245 billion is directly lost to corporate tax abuse by multinational corporations and $182 billion to private tax evasion. Multinational corporations paid billions less in tax than they should have by shifting $1.38 trillion worth of profit out of the countries where they were generated and into tax havens, where corporate tax rates are extremely low or non-existent. Private tax evaders paid less tax than they should have by storing a total of over $10 trillion in financial assets offshore.
Poorer countries are hit harder by global tax abuse
While higher income countries lose more tax to global tax abuse, the State of Tax Justice 2020 shows that tax losses bear much greater consequences in lower income countries. Higher income countries altogether lose over $382 billion every year whereas lower income countries lose $45 billion. However, lower income countries’ tax losses are equivalent to nearly 52 per cent of their combined public health budgets, whereas higher income countries’ tax losses are equivalent to 8 per cent of their combined public health budgets. Similarly, lower income countries lose the equivalent of 5.8 per cent of the total tax revenue they typically collect a year to global tax abuse whereas higher income countries on average lose 2.5 per cent.
The same pattern of global inequality is also strongly visible when comparing regions in the global north and south. North America and Europe lose over $95 billion in tax and over $184 billion respectively, while Latin America and Africa lose over $43 billion and over $27 billion respectively. However, North America and Europe’s tax losses are equivalent to 5.7 per cent and 12.6 per cent of the regions’ public health budgets respectively, while Latin America and Africa’s tax losses are equivalent to 20.4 per cent and 52.5 per cent of the regions’ public health budgets respectively.
Rich countries are responsible for almost all global tax losses
Assessing which countries are most responsible for global tax abuse, the State of Tax Justice 2020 provides the strongest evidence to date that the greatest enablers of global tax abuse are the rich countries at the heart of the global economy and their dependencies – not the countries that appear on the EU’s highly politicised tax haven blacklist or the small palm-fringed islands of popular belief. Higher income countries are responsible for 98 per cent of countries’ tax losses, costing countries around the world over $419 billion in lost tax every year while lower income countries are responsible for just 2 per cent, costing countries over $8 billion in lost tax every year.
The five jurisdictions most responsible for countries’ tax losses are British Territory Cayman (responsible for 16.5 per cent of global tax losses, equal to over $70 billion), the UK (10 per cent; over $42 billion), the Netherlands (8.5 per cent; over $36 billion), Luxembourg (6.5 per cent; over $27 billion) and the US (5.53 per cent; over $23 billion).
G20 countries meeting tomorrow responsible for over a quarter or global tax losses
G20 member countries meeting this weekend for the Leaders’ Summit 2020 are collectively responsible for 26.7 per cent of global tax losses, costing countries over $114 billion in lost tax every year. The G20 countries themselves also lose over $290 billion each year.
In 2013, the G20 mandated the OECD to require collection of the country by country reporting data analysed by the State of Tax Justice 2020 – a measure the OECD had long resisted until then. In 2020, the OECD’s consultation on country by country reporting highlighted two major demands from investors, civil society and leading experts: that the technical standard be replaced with the far more robust Global Reporting Initiative standard, and – crucially – that the data be made public.
The Tax Justice Network is calling on the G20 heads of state summit this weekend to require the publication of individual multinationals’ country by country reporting, so that corporate tax abusers and the jurisdictions that facilitate them can be identified and held to account.
Alex Cobham, chief executive of the Tax Justice Network, said:
“A global tax system that loses over $427 billion a year is not a broken system, it’s a system programmed to fail. Under pressure from corporate giants and tax haven powers like the Netherlands and the UK’s network, our governments have programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else. The pandemic has exposed the grave cost of turning tax policy into a tool for indulging tax abusers instead of for protecting people’s wellbeing.
“Now more than ever we must reprogramme our global tax system to prioritise people’s health and livelihoods over the desires of those bent on not paying tax. We’re calling on governments to introduce an excess profit tax on large multinational corporations that have been short-changing countries for years, targeting those whose profits have soared during the pandemic while local businesses have been forced into lockdown. For the digital tech giants who claim to have our best interests at heart while having abused their way out of billions in tax, this can be their redemption tax. A wealth tax alongside this would ensure that those with the broadest shoulders contribute as they should at this critical time.”
Rosa Pavanelli, general secretary at Public Services International, said:
“The reason frontline health workers face missing PPE and brutal understaffing is because our governments spent decades pursuing austerity and privatisation while enabling corporate tax abuse. For many workers, seeing these same politicians now “clapping” for them is an insult. Growing public anger must be channelled into real action: making corporations and the mega rich finally pay their fair share to build back better public services.
“When tax departments are downsized and wages cut, corporations and billionaires find it even easier to swindle money away from our public services and into their offshore bank accounts. This is of course no accident; many politicians have wilfully sent the guards home. The only way to fund the long-term recovery is by making sure our tax authorities have the power and support they need to stop corporations and the mega rich from not paying their fair share. The wealth exists to keep our societies functioning, our vulnerable alive and our businesses afloat: we just need to stop it flowing offshore.
“Let’s be clear. The reason corporations and the mega rich abuse billions in taxes isn’t because they’re innovative. They do it because they know politicians will let them get away with it. Now that we’ve seen the brutal results, our leaders must stop the billions flowing out of public services and into offshore accounts, or risk fuelling cynicism and distrust in government.”
Dr Dereje Alemayehu, executive coordinator at the Global Alliance for Tax Justice, said:
“The State of Tax Justice 2020 captures global inequality in soberingly stark numbers. Lower income countries lose more than half what they spend on public health every year to tax havens – that’s enough to cover the annual salaries of nearly 18 million nurses every year. The OECD’s failure to deliver meaningful reforms to global tax rules in recent years, despite the repeated declaration of good will, makes it clear that the task was impossible for a club of rich countries. With today’s data showing that OECD countries are collectively responsible for nearly half of all global tax losses, the task was also clearly an inappropriate one for a club heavily mixed up in global tax havenry.
“We must establish a UN tax convention to usher in global tax reforms. Only by moving the process for setting global tax standards to the UN can we make sure that international tax governance is transparent and democratic and our global tax system genuinely fair and equitable, respecting the taxing rights of developing countries.”
Country cases of tax losses
Typhoon Molave, described by Vietnamese Deputy Prime Minister Trinh Dinh Dung as “one of the two most powerful storms Vietnam has had in the past 20 years,” destroyed more than 700 houses and left 80 people dead and missing in October 2020. The Vietnamese government estimates Typhoon Molave to have caused $430 million in economic damage. Vietnam loses nearly as much tax, over $420 million (97 per cent of $430 billion), every year to global tax abuse.
Nearly half of South Africa’s adult population lives in poverty, with more women (52 per cent) in poverty, than men (46 per cent). The latest upper-bound poverty line published by the South African government in 2019 is ZAR 1,227 per month (almost $85 per month). If the $3.39 billion in tax that South Africa loses every year to tax abuse was instead given as direct cash transfers of $85 per month to people living in poverty, over 3 million people could be lifted out of poverty.
Greece’s annual loss of nearly $1.36 billion in tax (€1.15 billion) to tax abuse is equivalent to over a quarter (27 per cent) of Greece’s scheduled debt repayments for 2020, which total €4.19 billion. Among the multiple debtors Greece owes, the country is specifically scheduled to repay €443.7m to Eurozone countries in 2020. Greece’s annual tax losses are over double this amount.
Responsibility for global tax losses
The jurisdiction that causes countries the most global tax losses is British Overseas Territory Cayman, which is responsible for other countries losing over $70 billion in tax every year. However, Cayman is just one jurisdiction that falls under UK’s network of Overseas Territories and Crown Dependencies, where the UK has full powers to impose or veto lawmaking and where power to appoint key government officials rests with the British Crown. Infamously referred to as the UK spider’s web, extensive research has documented the ways in which this network of jurisdictions operates as a web of tax havens facilitating corporate and private tax abuse, at the centre of which sits the City of London.
The State of Tax Justice 2020 finds that the UK spider’s web is responsible for 37.4 per cent of all tax losses suffered by countries around the world, costing countries over $160 billion in lost tax every year.
The Corporate Tax Haven Index 2019 had previously estimated that the UK, together with its network of Overseas Territories and Crown Dependencies, Luxembourg, Switzerland and the Netherlands are together responsible for half of the world’s risk of corporate tax abuse, coining the label “axis of tax avoidance” for the group. The Tax Justice Network revealed in April 2020 that the axis of tax avoidance costs the EU over $27 billion in lost tax every year solely from US multinational corporations operating in the EU.
The State of Tax Justice Network confirms today that the axis of tax avoidance is collectively responsible for over 47.6 per cent of global tax loss incurred from corporate tax abuse. When including tax losses to private tax evasion, the axis of tax avoidance is responsible for 55 per cent of all tax losses suffered by countries around the world, costing countries nearly $237 billion in lost tax every year.
Analysis of the jurisdictions on the EU tax haven blacklist found the cohort to be collectively responsible for just 1.72 per cent of global tax losses, costing countries over $7 billion in lost tax a year. In comparison, EU member states are responsible for 36 per cent of global tax losses, costing countries over $154 billion in lost tax every year.
The Tax Justice Network has long criticised the EU’s blacklist for ignoring major tax havens while focusing on jurisdictions that are secretive but play an insignificant role in the global economy. The State of Tax Justice 2020 reveals that two jurisdictions blacklisted by the EU, Palau and Trinidad and Tobago, while non-cooperative with international tax regulations, did not create any observable tax losses for other countries.
On the other hand, British Territory Cayman which was briefly blacklisted for the first time in February 2020 but removed from the list in October 2020 after it was deemed compliant with international tax rules, is responsible for the biggest share of countries’ tax losses (16.5 per cent of global tax losses, equal to over $70 billion a year). The Tax Justice Network argues that Cayman being deemed to be compliant with international tax rules despite being the world’s greatest enabler of global tax abuse is evidence that current international tax rules are not fit for purpose.
Three actions governments must take
The Tax Justice Network, Public Services International and the Global Alliance for Tax Justice, along with supporting NGOs, campaigners and experts around the world, are together calling on governments to take three actions to tackle global tax abuse:
