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The real cost of the Paradise Papers is the millions of unseen victims of tax avoidance in the world's poorest countries

Guest content
15 November 2017

Tax dodgers may not be literally stealing medicines from the pockets of the poorest. But they are depriving poor countries of billions that could be invested in healthcare - and the reality of under-resourced health services is brutal, writes Rebecca Gowland for Oxfam.

When tax scandals like the Paradise Papers break, the focus, understandably, is on the big names involved. Explainer videos and flow charts unpack for us non-tax experts just how these complex international schemes work - how a web of companies is set up across a network of secretive tax havens by lawyers and accountants acting for extremely wealthy clients and global brands.

But there is another story behind the tales of private jets and profit-shifting. That of the unseen victims of tax avoidance - millions of people living in poverty.

Tax dodging affects countries rich and poor alike as we lose vital funds that could pay for things like hospitals and schools. But poor countries feel the impact most. The UN estimates they lose around £78 billion annually to corporate tax avoidance - money desperately needed for fighting poverty. It's estimated that the world's poorest regions lose a further £53 billion of tax revenue a year due to wealthy individuals using offshore havens.

Tax dodgers may not be literally stealing medicines from the pockets of the poorest. But they are depriving poor countries of billions that could be invested in healthcare. And the reality of under-resourced health services in poor countries is brutal.

Take Raj, a four-year old boy from a poor community in India's Kalahandi district. Like any child, Raj loves to play. But when he suffered head injuries and a broken leg after falling from a tree, his whole family paid the price. The costs of travelling to a distant hospital and paying for scans and treatment came to more than they earn in an entire year. To raise the cash they took out loans, sold their goats and personal possessions. Now, Raj is recovering. But the debts continue to be a heavy burden on a family already struggling to get by. To help repay the loans, Raj's brother has been pulled out of school to work.

Sadly, Raj's story is far from unique. Every year 100 million people are forced into poverty by having to find money to pay for healthcare. A further 150 million people face severe financial problems as their household budgets are swallowed up by medical bills. Countless more people simply go without the treatment they need.

Of course, it is down to governments to decide how much to invest in public services. But there is evidence to show that when developing countries increase their tax revenue - in particular from direct taxes like corporate and income tax - they spend more on healthcare.

Even small increases can make a huge difference. Spending just $5 extra per personeach year in 74 countries with large numbers of people living in poverty could prevent, on average, the needless deaths of eight million mothers, babies and children. Oxfam supports communities globally to demand more investment to cover shortfalls in vital services - and for more accountability from authorities about how tax revenue is spent.

Our new film,The Heist That No One is Talking About, aims to illustrate the hidden human cost of tax avoidance and build pressure for change. Thousands of people in the UK have signed a petition calling on the Chancellor to end tax secrecy.

UK-linked tax havens such as Bermuda and Jersey feature heavily in the Paradise Papers scandal, so there's a clear need for strong UK leadership to help bring global tax dodgers to book. As a priority, the Government should ensure that our overseas territories and crown dependencies don't act as tax havens that undermine the ability of other countries, especially poorer ones, to collect their fair share of revenue. That means putting an end to harmful tax practices and improving transparency - starting by introducing public registers revealing the real owners of companies.

Making sure that big companies in Britain report their tax payments in every country would also help to ensure that taxes are fairly paid in line with real economic activity, instead of profits being artificially shifted to zero-tax countries. 

As long as the global tax rules remain weak and open to exploitation, people in poor countries will continue to pay the price.

Original source: Huffpost