How tax havens create more poverty around the world
Several countries have used taxes as a way to build their economies. However, in a number of countries, tax havens have had a negative impact, creating more poverty in the world. Tax havens have paved a way for the few wealthy people and multinational corporations to be able to transfer their wealth and gains offshore so that they do not pay taxes. Despite the fact that a number of economies have progressed due to tax havens, many are trailing behind and the level of poverty is increasing in the masses because of the same tax haven (Christian, 2014: p 68).
Tax havens have been a major force behind the rising inequality experienced in many countries. Tax policies have been created which are favorable to the wealthiest people leaving the masses with a heavy tax burden (Christian, 2009. P 103). According to a research done by Oxfam, about $21-$32 trillion are untaxed, most of which is held by the world’s richest people. For example, the corporate tax system creates an avenue where tax can be avoided. Also, capital gain tax can be avoided as long as one uses the gains to acquire larger assets (Collins, 2012: p 102).
Given the fact that the few people who hold massive amounts of wealth end up not paying taxes, the governments struggle to raise revenues for the economies. This causes the governments to levy more taxes to the working middle and low-income earners to cover up for the tax that was lost from individuals and businesses that did not pay taxes to be able to finance its expenditures (Henry, 2011: web).
According to research done by Oxfam, despite the fact that tax havens have a negative impact on the populations of both developing and developed countries, the impact is more felt in the developing countries. Tax is the main source from which countries generate funds for their economies. A depression of revenues from taxes, affect the whole country (Oxfam international, web)
One of the Christian Aid program produced a report indicating that avoidance of tax through transfer pricing, profit shifting, false invoicing among others are eroding most developing countries more than $160 billion in tax every year (Palan, Murphy and Chavagneux, 2010. P 84).
In conclusion, tax havens cause more harm than good to the world. Tax havens are the major contributor to the deteriorating economies of the world. Punitive measures should, therefore, be kept in place to curb this evil that is a burden to the society (Shaxson, 2011: p 47).
Bibliography
Christian Aid. (2014). Africa Rising? Inequalities and the essential role of fair taxation. London: Bodley Head
Christian Aid, March (2009), False Profits: robbing the poor to keep the rich tax free. San Francisco: Berrett-Koehler Publishers.
Collins, C. (2012). 99 to 100 – How wealth inequality is wrecking the world and what we can do about it.San Francisco: Berrett-Koehler Publishers.
Henry, J. (2012). The Price of Offshore Revisited. Tax Justice Network International. Retrieved from http://www.taxjustice.net/cms/upload/pdf/Briefing_Paper_-The Price of Offshore-
14_MAR_2005.pdf
http://www.taxjustice.net/cms/upload/pdf/Closing_the_Floodgates_-_1-FEB-
2007.pdf
International Monetary Fund.(2014). Fiscal Policy and Income Inequality. Washington: International Monetary Fund.
Shaxson, N., (2011), Treasure Islands: Tax havens and the men who stole the world, London: Bodley Head
Palan, R., Murphy, R. and Chavagneux, C. (2010), Tax Havens: How Globalisation Really Works Cornell University
Oxfam international. Future of agriculture: online discussion blogs. Retrieved on March 8, 2015 from www.oxfam.org.
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