The massive fallout from the Panama Papers leak has driven the issue of tax avoidance to the top of the global agenda. The significance of the leak is not that tax avoidance of this type exists, but the extent to which so many individuals, political and business leaders will go to avoid their tax obligations. The revelations are symptomatic of a culture of tax avoidance that exists worldwide, one that has severe implications on the poorest and most vulnerable and ultimately our ability to finance efforts at combating the greatest global challenges we now face.
Basic transfer programs to lift everyone above the absolute poverty line would ask for about $65 billion a year, a fraction of the estimated $213 billion lost every year.
Tax evasion and tax avoidance has implications for us all — but has the greatest negative impact on developing economies, with an estimated $213 billion lost annually in these countries due to tax avoidance. To put this in perspective, over the next 15 years, the world has a chance to actually eliminate extreme poverty — that is, to end the misery of almost 1 billion people who live on no more than $1.25 a day. This goal could be reached at reasonable cost. Basic transfer programs to lift everyone above the absolute poverty line would cost about $65 billion a year, a fraction of the estimated $213 billion lost every year.
This lost revenue is needed now more than ever. The very future of our planet is under threat. Current levels of conflict and escalating humanitarian needs, combined with the rapid acceleration of climate change, mean that the challenges we face are both breathtaking in scale and truly global in their nature. To meet the enormity of these challenges, an ambitious and extensive plan, Agenda 2030: The Sustainable Development Goals, was agreed at the United Nations last year in New York.
These goals represent the most important set of aspirational guidelines for global development over the next 15 years. Taking up where the Millennium Development Goals left off, they are a more ambitious set of 17 goals with 169 targets but at their core is the aim to eliminate absolute poverty, ensure that no one goes hungry, and create a sustainable world where everyone has access to health, education and livelihoods.
The significance of these new goals is that they emphasize the universality of responsibility.
Their implementation will require diligence, political will and a robust global commitment to financing the plan. We are in a whole new paradigm. We are no longer talking in terms of billions of dollars, but trillions. Achieving the goals will require an investment of between 2 to 3 trillion dollars a year of public and private money over 15 years. That is roughly 15% of annual global savings, or 4% of global GDP. It is ambitious but not unattainable, and now is the time for turning ambition into action.
Of course, the burning question is, where will this money come from? In short: everywhere.
The significance of these new goals is that they emphasize the universality of responsibility. Because the world’s environmental, societal, and humanitarian concerns are now so interlinked, each individual has a stake in, and responsibility for, efforts to achieve a better world. That’s what we all signed up to, all 193 nation states, in New York last September.
It will require meeting the universally agreed target of 0.7% spending on overseas aid. However an over-reliance on increased overseas development aid, even matched with public generosity, will in itself be insufficient. Mobilizing the financial resources necessary to implement the plan will involve engaging all sections of society including governments, individuals and the private sector.
That is what makes the Panama Papers so shameful. Tax avoidance undermines the collective vision of societies and the global agreements to which they have subscribed.
The achievements realized during the period of the Millennium Development Goals, particularly in the areas of hunger, AIDS, and education show that when a concerted effort is made, real substantial change can be effected. The problems we currently face are not insurmountable, but they will require an unprecedented collective effort; putting our shoulders to the wheel in a universal way that has not been seen before.
Heroism has very often been associated with individual actions and pursuits. In the 21st century, if we are to take on the collective challenges we now face, true heroism will be found in the consistent and equitable implementation of fair taxation policy and those who follow that policy. The 21st century heroes will not only be those political and business leaders who make brave decisions, but every individual who embraces the quiet dignity of everyday self-sacrifice.
That is what makes the Panama Papers so shameful. Tax avoidance undermines the collective vision of societies and the global agreements to which they have subscribed. Moreover, it is simply unfair. That is why all sections of society, particularly the private sector, must make a firm commitment to tackling tax avoidance and embrace global tax reform. In pursuing the vision of the Sustainable Development Goals and a more sustainable equitable world, closing the loop on tax avoidance will be an essential starting point.