Countries 'Losing £400bn In Taxes A Year To Profit Shifting'

Countries 'Losing £400bn In Taxes A Year To Profit Shifting'

Governments around the world are losing as much as half a trillion US dollars (£400 billion) a year in tax revenue due to so-called "profit shifting" by multinational companies, according to research.

The research published by the Tax Justice Network found that poorer countries were hardest-hit by the practice, which involves companies reducing their liabilities by moving taxable profits from the country where their real economic activities take place to tax havens, where they may have no more than a nominal presence.

The TJN's figures suggest the UK loses just over a billion dollars (£850 million) a year to profit-shifting activities, but this makes up just 0.04% of GDP - lower than all but three of the 102 countries studied.

By contrast, the African state of Chad's estimated loss of around 950 million dollars (£765 million) amounts to almost 7% of GDP and is more than the total tax gathered by the country's government in a year.

Pakistan lost the equivalent of almost 40% of its tax revenues to profit shifting and the Indian Ocean island state of the Comoros lost around 36%, according to the figures compiled by TJN chief executive Alex Cobham and Petr Jansky of Charles University in Prague.

Countries including Malta, Argentina and Zambia lost more than 4% of GDP.

Largest loser in cash terms was the US, at 189 billion dollars (£152 billion) - almost 6% of the total annual tax take and 1.13% of GDP.

Mr Cobham said: "These findings support the long-held view that it is lower-income countries that suffer the most intensive losses due to tax-dodging by multinational companies.

"The current status quo, in which international tax rules are set at the OECD (Organisation for Economic Co-operation and Development) where lower-income countries lack any effective voice, is simply untenable.

"Now we need political progress to challenge profit shifting. Governments around the world can legislate today for the publication of multinational companies' country-by-country reporting - revealing the precise pattern of profit shifting to citizens, and giving tax authorities the power to curtail it."

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