Multinational corporations shifting profits to tax havens accounted for $301 billion of the $472 billion figure of annual losses used in the 10-year projection, according to the advocacy group's report. Governments lose the other $171 billion from wealthy individuals stashing assets in secrecy jurisdictions, half of which can be found in the U.K. and its dependent territories, the group said.
The group drew its conclusions about corporate tax avoidance from 2018 data on country-by-country tax reports that the Organization for Economic Cooperation and Development published this year, according to Alison Schultz, research fellow at the Tax Justice Network, who spoke during a virtual presentation on the report. To estimate individual tax evasion, researchers looked at jurisdictions that rank high in financial secrecy and have abnormally large bank deposits relative to the size of their economies, drawing from data on cross-border bank deposits from the Bank for International Settlements, Schultz said.
The report's core recommendation is that "the key to ending cross-border tax abuse is to deliver on a U.N. tax convention and to create a global tax body under U.N. auspices." The OECD's inclusive framework on base erosion and profit shifting, a 142-jurisdiction group that has attempted to address these issues, has not delivered meaningful results, the report said.
The OECD did not respond to a request for comment.
Dan Neidle, founder of Tax Policy Associates and former tax lawyer, called the report's headline statistics false and indefensible in a blog post Tuesday. The group's estimate of $301 billion lost annually to cross-border corporate avoidance is based on how much tax would be raised if the international tax system allocated taxing rights on companies to countries according to wages paid and number of employees, according to Neidle.
"No country taxes on this basis," Neidle wrote. "It's a fictitious calculation."
Neidle also took issue with the statistic used to calculate individual tax evasion — $9.9 trillion of financial wealth is held in offshore accounts, sourced from a study published by the European Commission in 2018.
"The research cited in the report all pre-dates" the 2010 U.S. Foreign Account Tax Compliance Act and 2014 OECD Common Reporting Standard, which have resulted in $16 trillion of assets being reported to tax authorities, Neidle said.
Mark Bou Mansour, head of communications at the TJN, told Law360 on Wednesday that the group refuted such criticisms of its methodology years ago and that its estimates of global revenue losses attributable to cross-border tax abuse align with those of leading researchers and organizations in the field.
"Nonetheless, these debunked criticisms of our report continue to be repeated. Sadly, this includes repetition of quite basic misunderstandings of the methodology," Mansour said. "Despite their claims, the issues raised do not have a material impact on the results of our report."
In 2021, the group published a rebuttal of similar claims made by Neidle after that year's edition of the report, arguing, in part, that the common reporting standard had made "an immaterial difference" on the issue.
The TJN's methodology implicitly accounts for recent advances in transparency, Mansour said, and the critics' idea that these advances have made a significant improvement to the situation "has turned out to be false." He said the TJN's methods are rooted in the same methods used in articles published in the most prestigious economics journals.
Richard Murphy, a founder of the Tax Justice Network who publicly dissociated himself from the organization in 2021, said the report's methodology is riddled with false assumptions and its claims are meaningless. His three main criticisms, listed in a blog post Tuesday, were that the report assumes all bank deposits in tax havens are illicit, all income earned from those accounts is unreported and that returns from offshore income exceed returns from onshore income.
"The data they produce is meaningless and not even newsworthy," Murphy said. "TJN persists in pretending that the OECD has achieved nothing for tax justice when that is obviously untrue."
Schultz said during her presentation that the report does not assume all bank deposits in tax havens are unreported, but that instead the data represents items that are reported as a liability somewhere but not as an asset anywhere.
"We only look at the part of the wealth which is hidden in a sense that it's actually not matching the statistics of reported liabilities and reported assets," she said.
The group's rebuttal in 2021 of similar claims by Murphy accused him of spreading erroneous information about its methodology.
Power dynamics that shape global tax negotiations at the OECD may continue at the U.N., but its greater openness to participation by nongovernmental groups, the media and trade unions is encouraging, Irene Ovonji-Odida, a lawyer who chairs the Tax Justice Network's board of directors, said during the presentation.
"There is significant pressure that countries are facing within the OECD process, and yes, that will also be brought to bear in the U.N.'s space, but because of structural issues within the UN, there is much, much more capacity to reduce it and also to expose it," Ovonji-Odida said.
In Tuesday's report, the Tax Justice Network asked countries to vote in favor of having the U.N. play a greater role in the global tax arena at the U.N. General Assembly this fall, at which countries are expected to discuss a report on the topic by the U.N. secretary general.
--Editing by Neil Cohen.
Update: This article has been updated with comment by Bou Mansour.
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