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Global Tax Evasion Report 2024

Global Tax Evasion Report 2024:

The European Union Tax Observatory has released ‘Global Tax Evasion Report 2024’ highlighting several critical issues related to tax evasion, the Global Minimum Tax (GMT) on billionaires, and measures to combat tax evasion.

  • The report investigates the effects of international reforms adopted over the past 10 years, such as the automatic international exchange of bank information, and the international agreement on a global minimum tax for MNCs, among other issues.
  • Tax evasion is the illegal act of not paying taxes that one owes to the government by underreporting income, inflating deductions, hiding money in offshore accounts, or using other fraudulent means to reduce one’s tax liability.
  • It is a deliberate and unlawful attempt to reduce tax obligations by misrepresenting or concealing financial information.

Highlights of the Report:

  • Offshore tax evasion has decreased over the past decade. In 2013, 10% of the world’s GDP was stored in global tax havens, but now only 25% of this wealth remains untaxed.
  • Global billionaires have effective tax rates equivalent to 0% to 0.5% of their wealth, due to the frequent use of shell companies to avoid income taxation.
  • US billionaires have an effective tax rate equivalent to 0.5% of their wealth and French billionaires a tax rate of zero.
  • Multinational corporations (MNCs) have shifted around USD 1 trillion to tax havens in 2022, equivalent to 35% of the profits they earned outside their headquarters countries.
  • The report red-flagged the trend of “Greenwashing the Global Minimum Tax” wherein MNCs can use ‘green’ tax credits for low carbon transition to reduce their tax rates way below the minimum of 15%.
  • Tax evasion, wealth concealment, and profit shifting to tax havens are not natural occurrences but results of policy choices or the failure to make necessary choices.
  • There is a need to evaluate the consequences of tax policies and make improvements for sustainable tax systems.