Tax havens rob the world’s poor, says Oxfam

Anti-poverty organisation takes its cause to Davos.

JOHANNESBURG – Tax havens are costing the world’s poor trillions of dollars, according to global anti-poverty body, Oxfam, which finds that the richest 1% now have more wealth than the rest of the world combined and frequently engage in the kind of “wealth management” that includes tax avoidance.

In its report An economy for the 1%, released on Monday, the organisation finds that a global network of tax havens enables the world’s über wealthy to “hide” as much as $7.6 trillion.

This industry has been granted legitimacy by the “dominant market fundamentalist world view that low taxes for rich individuals and companies are necessary to spur economic growth and are somehow good news for us all”, Oxfam notes.

“The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries,” says Oxfam.

Tax havens lead to an outflow of wealth that would otherwise put countries in a position to finance interventions proven to help reduce inequality, according to Oxfam South Africa research and policy lead, Ronald Wasso.

“There are a number of proven interventions that work against inequality, including a national minimum wage and free basic services for the poor,” Wasso told journalists at a briefing in Johannesburg on Monday.

Oxfam, which has recently set up an office in South Africa, will call on global business and government leaders to end tax havens at this week’s World Economic Forum (WEF) in Davos, Switzerland.

The confederation has had a presence in South Africa for more than 57 years through its global footprint and has recently established a local office headed by Sipho Mtati, the former secretary general of HIV/Aids lobby group, the Treatment Action Campaign (TAC).

Oxfam is calling for four interventions in the country, which it believes have proven effective in ending inequality. These include a living minimum wage; a basic income grant; a women-centred land reform programme; and free or heavily subsidised services for the poor.

“Education is a key feature of this. It forms a core pillar of some of the interventions we envisage under ‘highly subsidised services’,” commented Ayabonga Cawe, economic justice project manager.

Profits hived off to tax havens by the private sector could be used to subsidise university fees, added media and communications manager, Simamkele Dlakavu, who said Oxfam South Africa supports the cause of university students in the #feesmustfall movement.

According to the World Bank and International Monetary Fund (IMF), illicit financial flows rob Africa of more than $50 billion annually and are estimated to have cost the continent $1 trillion over the past 50 years – roughly equal to all the official development assistance Africa has received over that time.

While domiciling a company or a bank account in a country with a lot of tax breaks is not illegal, that global tax authorities are tightening up on various forms of tax avoidance and evasion – such as base erosion and profit shifting (BEPS), where multinationals shift company profits to low-tax jurisdictions – suggests that governments and society at large are becoming increasingly uncomfortable with the idea of tax havens.

South Africa still highly unequal

Based on research from the World Bank and Credit Suisse, Oxfam estimates that the richest 10% of South Africans saw their income grow by 64% to $69 billion between 1993 and 2011. Over the same period, the income of the poorest 50% grew by 3% to $11 billion.

These figures are expressed at 2005 levels, when the average rand:dollar exchange rate was R6.36. In other words, the difference between the incomes of the two groups was roughly R438 billion versus R70 billion in 2011.

It is no secret that South Africa is a highly unequal society, which frequently finds itself at the top or near the top of various measures of global inequality.

One of the major contributors to inequality is deliberate policy decisions, argued Cawe. He said that Oxfam would like to see political parties disclose their private funders, in order to identify “corporate capture”, where politicians are perversely incentivised to create policy frameworks that benefit their influential funders, often multinational corporates.

“The fight against poverty will not be won until the inequality crisis is tackled,” Oxfam maintains.

The WEF meeting kicks off on Wednesday under the theme ‘Mastering the Fourth Industrial Revolution’, which examines the transformative impact of technology on industries, economies and societies.

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Those who “fight against poverty” are as motivated and psyched up as those who fight against obesity. They should combine forces and in that way solve each other’s problems.

Surely the issue here in sunny RSA is not the fact that the rich (and others) are ensure tax avoidance, but rather more of a case of once the tax receipts have been collected, that there is just wanton corruption and theft and deceit in the way the tax funds are distributed. Coupled with this you have a government who don’t care a fig for the poor or the rural population, they are merely cannon fodder used to win votes, and stay in power. What this government is very good at is harping on the past, keeping the general population uneducated, and waiting for a handout from the beautiful ANC masters

You are spot on Grahamcr. In South Africa it is not about taking from the rich and giving to the poor. It is more like taking from everyone and giving to the corrupt. After more that 2 decades in power, our government have more poor and uneducated people than when they started out. Instead of educating the population, they have lowered the standards and done their best to keep their supporters ignorant and oblivious to anything beyond their blinkers. The tide though is turning.

Until the end of time there will be people out there with begging bowls in their hands. Some who need it and many who don’t. But more than that, there is always an army of do gooders who for the most part have never accumulated much in their lives, some who have perhaps never worked in their lives, but think they are expert enough and suitably qualified enough to tell those who managed to gather a little nest egg together, what to do with their spoils, where to invest it, and also lay claim to part of that nest egg to be used for their benefit and also expect to have part of that nest egg taken from the rightful owner in the form of taxes, fees, etc.

Decide what you want, Capitalism or Communism. You are not getting any of my hard earned cash without a fight.

Regrettably Oxfam, tax havens will not be eliminated, in fact they will grow. If you want to save money, have your conventions in places that cost a lot less than they do in Davos, and donate the difference to the causes you claim you are fighting for. Don’t run with the hares and hunt with the hounds.

Wasn’t Chris Hart suspended for highlighting some of what’s being said in this article ?
Okay, in hindsight, Chris could’ve phrased his statements differently but… the evidence lies here before us.

Is absolute equality even a realizable possibility ?
Probably not in my opinion, and in any case, South Africa has a lot to fix, corruption, incompetence, education etc etc before things like tax havens become an issue that keeps anyone up at night.

“Is absolute equality even a realizable possibility?” I suggest the answer is a resounding “NO”. You can’t make the poor rich by making the rich poor – an old adage but still true today. I feel really sorry for Chris Hart – I don’t think his remarks were racist, but he had to become the sacrificial lamb. If he had waited for a week or so after Penny Sparrow’s daft performance, I doubt that his comments would have raised the ire of most people.

Don’t be ridiculous. The CEO of Oxfam earns north of £200k per annum. Compare this with the CEO of the Salvation Army= $12k per annum. Guess who gets my spare cash? Disable kids, animals and the Salvos. Not Oxfam. Oxfam lost my support when they jumped on the Climate Change bandwagon and started spreading vile propaganda and foul untruths in the classroom. One of their fundamental tenets is to deny the third world the use of fossil fuels to improve their standard of living.

That said, britches, Oxfam is in effect demanding a share of money that is not their own. They see people produce wealth and they covet it. The green eyed monster. Its all about money. With the left it is always about someone else’s money. If the state was not as avaricious people with cash would invest more and create jobs that pull the poor out of poverty the proper way instead of handouts.

I think the point should be made that the Capital Flight of the $50 billion per annum is NOT necessarily going in search of a Tax Haven, but rather leaving so as not to be under the control of local jurisdictions. Ask yourself where Mugabe’s money is? It is almost certainly all over the world in Tax Havens, but if those tax havens didn’t exist would it still be in Zimbabwe? NO.

International diversification of assets is normal behaviour for the wealthy in any country, but becomes much more prevalent when political instability is an issue. South Africa’s political instability (or policy uncertainty) after Nenegate is a perfect example in the short term. Zim is a better example in the long term.

The solution is to create a stable, well educated, free country that investors flock to naturally. Create the conditions where the capital is better served by staying.

If SARS really believed that billions are hived off to tax havens waiting to be collected, why don’t they appoint a team of 100 – 200 people to go and get it? If there are really US$7,6 trillion in tax havens and we assume that just R250 billion belongs to South African individuals, it would make sense to spend R200 –R300 million to collect R250 billion x41% = R102,5 billion which makes business sense in everybody’s books. If they don’t want to do it themselves, they can outsource the work. I am sure there are hundreds of firms in South Africa who will fall over their feet to work for say 10% of R102 billion = R10,2 billion to go and get it. But we all know it is just a red herring and it is convenient to blame capitalism. According to the EFF the real enemy is “white monopoly capitalism.”

Oxfam? You must be kidding – Apparently Oxfam received £401.4 million during the 2014 financial year but only £298.4million was employed for ‘charitable expenditure’, according to Oxfam’s annual report. The bulk was spent on admin costs and salaries. Enough said!

Every country in the world has a right to establish laws and incentives to create a comparative advantage over other jurisdictions to entice investments to its shores. In the case of so-called tax havens with precious few natural resources, they have used this to great effect to develop their financial services sector and develop resident human capital and expertise. While the media would focus our attention on those invested offshore for nefarious reasons, surely we should be taking lessons from countries that can re-imagine their global purpose!

Strange how Oxfam only asks for ‘ Living Minimum Wage ” but leaves out a
‘ Living Minimum Pension ” . It appears that once one Retires the NEED to Live falls away …..

Well in south africa this haven is in the form of stolen land, corporates
relocating HQ offshore and western brand names that are invading africa
via US fund managers

End of comments.

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