Tax Evasion: How the Poor Pay for the Powerful
In his State of the Union Address last month, President Obama conveyed concerns about the effects of tax evasion on American small businesses. He stated, "Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change."
Around the world, corporate tax evasion unfairly shifts the burden of taxation onto small businesses and individuals and limits governments’ revenue to spend on necessities and development. In the United States, two-thirds of American corporations paid no income tax at all between 1998 and 2005.
This past weekend, the U.S. House of Representatives approved $61 billion in budget cuts - including federal funding for family planning and teen pregnancy prevention, Pell Grants for lower-income college students, and food aid for poor pregnant women and women with children. Alternatives, however, exist: trimming the massive military budget (worth 909.4 billion in FY 2011), reversing President Obama’s extension of Bush-era tax cuts for the wealthiest and lowering of the estate tax (worth $900 billion), and closing U.S. corporate tax loopholes (worth $37-60 billion).
Activists in the United States and the UK are starting to wake up to the fundamental question of tax justice. Yet, corporate tax evasion may be even more burdensome in low-income countries where individuals and small businesses have less capacity to pay.
Enabling governments around the world to retain their rightful portion of profits earned within their borders will build up their ability to provide basic services and invest in development. This in turn will help avoid the need to take out new sovereign loans and the dangers of unsustainable debt. For this reason, Jubilee USA is joining with the Tax Justice Network in an attempt to stem the massive illicit flow of resources from North to South. Watch for actions to come.
How does all this evasion work? Read on here.