Chapter 4 | Page 162
developing States which result in poor enforcement and high levels of tax
evasion and avoidance. Tax evasion and avoidance create problems for all
countries, but their negative impact is particularly serious for developing
countries given their low tax base and weak institutional capacity.
The Tax Justice Network estimates that more than US$3.1 trillion was lost to
tax evasion globally in 2011, which is significantly larger than the total
international aid received by all developing countries.102 It is also estimated
that countries in Africa alone lose more than US$79 billion annually due to tax
evasion, which is almost equal to the total expenditure for health and education
in the whole continent.103 The International Bar Association’s Tax Abuses,
Poverty and Human Rights report in 2013 classifies tax abuses as ‘tax
evasion, tax fraud and other illegal practices − including the tax losses
resulting from other illicit financial flows such as bribery, corruption and money
laundering.’104 Base erosion and profit shifting (BEPS), tax holidays and
offshore investment accounts are also relevant to tax abuse.105
Tax havens encourage multinationals to take advantage of low tax rates and
lax regulatory environments to avoid and/or evade taxes. Some estimates
place the amount of lost revenue for developing countries between US$1.26
and US$1.44 trillion, most of which results from the trade mis-pricing practices
of multinational corporations.106 Tax evasion may be encouraged by the
increase in capital movement and the lack of capacity of governments to
monitor these movements and individual transactions. Mispricing and transfer
pricing techniques are commonly used by multinational corporations to divert
102
The Tax Justice Network, 'The Cost of Tax Abuse' (Briefing Paper on the cost of tax
evasion worldwide, The Tax Justice Network), <http://www.tackletaxhavens.com
/Cost_of_Tax_Abuse_TJN%20Research_23rd_Nov_2011.pdf>.
103
Ibid.
104
International Bar Association, Tax Abuses, Poverty and Human Rights London, 2013),
<http://www.ibanet.org/Document/Default.aspx?DocumentUid=4977CB3D-4988-4C9C84C7-9050A5CB2311>, 7.
105
See for example, Dhammika Dharmapala, 'What Do We Know about Base Erosion and
Profit Shifting? A Review of the Empirical Literature' (2014) 35(4) Fiscal Studies 421-448;
Gillian Brock and Thomas Pogge, 'Global Tax Justice and Global Justice' (2014) 1(1)
Moral Philosophy and Politics 1-15.
106
Itriago, above n 18, 5.
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