^{Photo by Vince Millett under a CC Licence}

New research undertaken by Richard Murphy on behalf of the Tax Justice Network has put the cost of global tax evasion at a staggering $3.1 trillion a year, or more than 5 per cent of global GDP.

Tax evasion (not to be confused with tax avoidance) is the illegal non-payment of tax to the government of a jurisdiction to which the money is owed by a person, company, trust or other organization who should be a taxpayer in that place. Murphy’s research estimates tax evasion for 145 countries in the world, covering 98 per cent of world GDP between them and 92.4 per cent of the world’s population.

$3.1 trillion a year is a seriously significant figure by anyone’s standard. To help put it into context, Murphy has compared countries’ tax evasion figures to their levels of healthcare spending, calculating that in 67 of the 145 jurisdictions assessed, tax evasion losses are larger than the entire healthcare budgets of those countries. In Bolivia, for example, tax evasion is more than four times the South American country’s health spending – in other words, over 400 per cent.

Murphy is adamant that the public spending cuts being imposed on vulnerable communities worldwide must be reassessed in light of unbridled levels of tax evasion. Indeed, he is in no doubt that his findings add a new policy agenda to public debate on the global financial crisis:

‘For example, Italy loses $244 billion to tax evasion a year. Its current debt of $2.5 trillion represents just over 10 years of tax evasion on this basis. If only more had been done to tackle rampant tax evasion, Europe would not be facing a crisis today.’

A central way to tackle tax evasion is to clamp down on tax havens. The Tax Justice Network’s new Tackle Tax Havens website highlights the critical role that tax havens – or secrecy jurisdictions – play in corrupting the global economy. As well as a jargon-free section explaining what a tax haven is, accompanied by an excellent animation, there is a set of case studies which brings tax havens to life, comparing them to everything from a dark presence you would find lurking in a Harry Potter novel to wrinkle cream. Crucially, there are also proposed solutions, both at a policy and at a personal level.

The collection of tax – and the failure to do so – is fast becoming one of the most important issues on political and social agendas across the world. With austerity measures kicking in hard and fast, serious questions are being raised about the so-called ‘no alternative’ cuts. Clearly there are alternatives – tackling tax havens would be a very good place to start.

Twitter: @tackletaxhavens
Facebook: /tackletaxhavens

Tess Riley works for the Tax Justice Network and as a freelance journalist.