Tax dodging by the superrich is driving global inequality, Oxfam says

Tax dodging by the super-rich is one of the main drivers of global income inequality and must be sharply curtailed, according to a new report from the global nonprofit Oxfam.

Citing research by Berkeley economist Gabriel Zucman — a protégé of Thomas Piketty, author of the global bestseller on inequality, Capital — Oxfam estimates that wealthy households around the world had as much as $7.6 trillion squirreled away in offshore accounts at the end of 2013. Another recent analysis by the groups Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund projected that the United States would be owed $620 billion in federal taxes if its largest 500 corporations did not engage in offshoring.

“There’s growing evidence that this is playing a significant factor in the accelerating wealth of the top one percent,” said Oxfam U.S. policy director Gawain Kripke. “The ability that they have to use maneuvers like parking their money in offshore jurisdictions is exacerbating the growing inequality around the world."

Oxfam’s report, titled “An Economy for the One Percent,” does not attribute growing inequality solely to tax avoidance. Other drivers include political corruption and the widening compensation gap between employees and executives, according the report. But Oxfam gives tax avoidance the strongest emphasis, and its policy recommendations include “a global approach to end the era of tax havens” as a top priority.

Tax avoidance is pernicious because it often deprives governments of the funds they need to provide basic services, said Kripke.

“It’s starving key programs that help everybody, but especially poor people, get on their feet,” said Kripke. “This is true in both rich and poor countries, but you see it most acutely where poor countries have no health care system, where large numbers of students are either getting no education or a very poor quality education. That’s where it becomes a moral issue."

Some nations have begun to take action. In October, the Organization for Economic Cooperation and Development (OECD) presented a package of disclosure rules and regulations that states could use in their efforts to reduce corporate tax avoidance. It was the product of the BEPS (Base Erosion and Profit Shifting) Project, an effort between OECD and G20 member countries.

The recommended BEPS action plan includes a call for international treaties to block tax avoidance and increased financial reporting standards for corporations.

Edward Kleinbard, a law professor at the University of Southern California, said he thinks “substantial progress has been made in the last few years.” More sunlight will help even more, he said.

Corporations "are very aggressive in their interpretation of law, and they negotiate sweetheart deals with countries, and transparency will help with all of that,” Kleinbard said.

Still, Oxfam believes that far more needs to be done. Kripke said the “first order challenge” of getting G20 and G7 states to prioritize tax avoidance had been met, but they still had to take substantive measures against it.

“The second order challenge is how to create black lists and pressure on tax havens to at least be more transparent,” said Kripke. “If not to shut it down, to make it more difficult or impossible to use strategies that many wealthy people and corporations are using to avoid taxes."

Besides cracking down on tax avoidance, the Oxfam report urges more nations to institute living wage rules, promote equal pay for women, and increase spending on social services for the poor.

The richest 62 people in the world hold as much wealth as the bottom 50 percent of the global population, according to the report.