Tag: tax evasion

This article is republished from The Conversation under a Creative Commons licence

by
Miroslav Palanský, Charles University

Tax havens have become a defining feature of the global financial system. Multinational companies can use various schemes to avoid paying taxes in countries where they make vast revenues. In new research, my colleague Petr Janský and I estimate that around US$420 billion in corporate profits is shifted out of 79 countries every year.

This equates to about US$125 billion in lost tax revenue for these countries. As a result, their state services are either underfunded or must be funded by other, often lower-income taxpayers. It contributes to rising inequality both within countries and across the world.

Given the nature of the issue, it is intrinsically difficult to detect tax avoidance or evasion. To get round this, we use data on foreign direct investment (FDI) collected by the International Monetary Fund to examine whether companies owned from tax havens report lower profits in high-tax countries compared to other companies.

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