January 27, 2010
Monique Perry Danziger, +1 202 293 0740 ext. 222
WASHINGTON, DC – The UK’s proposal to tackle tax evasion in developing countries by instituting multilateral tax information exchange agreements and requiring multinational corporations to provide country-by-country reporting of profits and revenue could help prevent the loss of as much as $1 trillion from developing countries every year, says Global Financial Integrity (GFI).
“Every year crime, corruption, and tax evasion drain $1 trillion out of the developing world,” said GFI managing director Tom Cardamone, who will be in Paris for the second day of the OECD’s Global Forum on Development meeting, where the UK made its announcement today. “That’s ten times the amount of official development assistance that’s going in, or put another way, for every $1 in economic aid received by developing countries, $10 is being lost. The UK’s proposal is a critical first step in tackling this devastating problem.”
A new GFI report due out later this week, The Implied Tax Revenue Loss of Trade Mispricing, finds that developing countries are losing as much as $100 billion a year to just one form of tax evasion: trade mispricing.
“Our report shows that developing countries are losing at least twice the UK government’s estimate of $50 billion,” said Mr. Cardamone. “Furthermore, the report’s $100 billion figure is likely understated, as it only reflects tax revenue lost through trade mispricing occurring through re-invoicing. The report also only measures tax revenue lost on illicit money coming out of developing countries, it does not take into account money that is being held abroad,” Mr. Cardamone added.
“The UK is now at the forefront of efforts to crackdown on tax evasion and other illicit financial practices in the developing world,” said GFI director Raymond Baker. “The U.S. and other G20 nations should immediately follow suit and follow through on promises made in September at the last G20 summit to increase transparency and accountability in global finance.”
GFI recently launched its “G20 Transparency Campaign” which will recruit signatories from around the world on a petition to be delivered to the G20 at their June meeting calling for transparency in global finance, for more information go to G20Transparency.com.
The Implied Tax Revenue Loss of Trade Mispricing is due out later this week. To request a copy or arrange an interview with GFI spokespersons on this issue contact Monique Danziger at 202-293-0740.