Wednesday, April 19, 2017

India suffers US$ 41.17 billion loss due to corporate tax avoidance, or 2.34% of GDP, one of the highest in the world

By Rajiv Shah
India loses US dollars 41.17 billion dollars, or 2.34% of its Gross Domestic Product (GDP), as a result of corporate tax avoidance. While in quantitative terms this loss is the fourth largest in the world, next to the United States (188.8 billion dollars), China (66.8 billion dollars) and Japan (46.8 billion dollars), the loss as percentage of GDP tells a totally different story.
The size of the economies of US, China and Japan is much bigger than that of India, one reason why their quantitative loss due to corporate tax avoidance is more than that in India. However, in percentage of GDP lost, India’s 2.34 per cent is much higher than the US’ (1.13 per cent), Japan’s (0.93 per cent), and China’s (0.75 per cent).
Revealing this, a new research paper by the United Nations (UN) think-tank headquartered in Helsinki, the United Nations University World Institute for Development Economics Research (UNU-WIDER), “Global distribution of revenue loss from tax avoidance”, calculates, the total revenue loss across the world comes to 500 billion dollars in a year.
Jointly prepared by a British scholar, Alex Cobham, and a Czech scholar, Petr Jansk√Ĺ, the paper finds that, as percentage loss as a result of corporate tax avoidance, is very high in developing countries. If Guyana with 6.97 per cent tops the list, Chad follows suit with 6.97 per cent, Malta 4.59 per cent, Comoros 4.42 per cent, Zambia 4.42 per cent, and so on.
Interestingly, India's neighbour, Pakistan, falls in the category having one of the highest percentage of GDP loss as a result of corporate tax avoidance -- 4.42 per cent. Other neighbouring countries’ losses, however, are lower than that of India – it is 1.65 per cent for Sri Lanka, 1.48 per cent for Bangladesh, and 0.75 per cent for Nepal.
Commenting on the report, the World Economic Forum (WEF) wonders, “What would you do with $500 billion? The first challenge might be actually getting your head around quite how much money that is. If you like to travel in style you could buy 1,150 Airbus A380s… If you just wanted to show off, you could cover a football field to a depth of 1.5 metres with cash.”
Pointing out that it’s “the amount of revenue the world is losing as a result of tax avoidance”, WEF, which is a Switzerland-based organization of world political and business leaders seeking to create global partnership on business, political, intellectual and other issues, says, “Corporate tax is a vital source of government revenue across the globe. It is especially vital in developing countries.”
Noting that UNU-WIDER findings “highlight the extent of global tax avoidance – as well as the countries facing the biggest shortfalls”, WEF says, “In terms of overall losses, you probably won’t be surprised to see some of the world’s biggest economies at the top. Given the size and strength of their economies, they’ve racked up significant losses.”
The report emphasises the significance of the losses as a percentage of GDP: “The intensity of losses is substantially greater in low- and lower middle-income countries: and in sub-Saharan Africa, Latin America and the Caribbean and in South Asia compared to other regions.”

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