More than $370 Billion held by Australians in foreign tax havens, report suggests

According to the Global Tax Evasion Report by EU TAX Observatory, Australians have held over $370 billion in recognized tax haven countries, and multinational corporations moving profits to countries with lower tax rates led to an $11 billion loss in tax revenue for the Australian Treasury in 2020.

While talking about what could have contributed to wealthy people moving their wealth to tax havens. Gabriel Zucman, the co-author of the report stated, “Tax evasion, wealth concealment, profit shifting to tax havens are not laws of nature”.

He added, “They are the results of policy choices or of the failure to make certain choices”.

However as the report mentions, certain choices have yielded positive results, leading to a drop in a key form of foreign tax evasion “by a factor of about three over the last 10 years”.

Over the past few decades, globalization has introduced new avenues for evading tax, which have been leveraged by multinational corporations and affluent individuals worldwide.

The report indicates that global billionaires continue to maintain their tax rates at an effective level of between 0 and 0.5 percent of their wealth by employing shell companies to evade income tax. Shell companies are often used to hide their identity and engage in illegal business.

How Much Tax Evasion Costs the Economies?

Tax invasion can cause substantial losses to economies in many ways, possibly costing billions of dollars each year.

According to the World Finance report, the International Monetary Fund (IMF) assessments indicated that tax evasion leads to a yearly revenue loss than $600 billion, with the US, China, and Japan identified as primary culprits.

Europe is estimated to lose an annual revenue of $55 billion to $75 billion due to tax evasion as reported by European Parliamentary Research Service.

Initiatives taken by different countries to counter tax evasion

Global Tax Evasion Report apart from highlighting the tax evasion statistics also elaborates on how authorities around the globe are tackling this problem. The legislative bodies work on designing tax regulations that outline revenue administrative efforts by balancing the flow of information between countries to minimize tax evasion.

Over the last 10 years, several initiatives have been proposed to minimize international tax evasion. These initiatives encompass the introduction of previously considered unattainable forms of international collaboration, which entails the automatic sharing of banking information, a practice that has been in place since 2017 and is now adopted by more than 100 countries in 2023.

One way to ensure transparency is to make it easy for authorities to know who ultimately owns a company. For this purpose, countries can take measures to make sure that beneficial ownership data is available publicly.

Governments around the world are initiating efforts to centralize data on beneficial ownership. According to Open Ownership, 57 countries currently have established central repositories for corporate beneficial ownership data. approximately, 60% of the countries offer public access to their repository.