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DEEP POCKETS AND STARVATION, THE CONTRASTING PROGRESSES OF TAX FRAUD

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More than 3 billion people, nearly half of the world’s population, live on less than $2.50 a day, and more than 1.3 billion live on less than $1.25 a day1. Poverty is a growing problem in almost every corner of the world, affecting a large part of the population, particularly the most vulnerable ones. In addition, the gap between rich and poor has dramatically increased in recent times to the extent that only 62 people own as much as the poorest half of the world’s population2.

Restricted access to education and low incomes are some of the causes of this growing inequality. However, one of the main reasons of this issue is the existence of an unfair tax system that tends to benefit multinational companies and the most powerful individuals at the expense of the most vulnerable individuals. Big corporations use different mechanisms to pay little or no taxes in the countries where they are located, which prevent local governments of collecting large sums of tax revenues and resources needed to provide public services, such as healthcare, education and pensions. Moreover, these funds that governments cannot collect don’t end up in productive investments in the countries where they were generated, but in offshore tax havens and in the wealthiest people’s pockets.

Fiscal maneuvers divert critical funding from the State government coffers that in case of having them, would be useful to save 1.9 million children a year3. However, given the lack of available resources, governments seek to collect funds by raising taxes which, as a consequence, increases even more the vast gap between the rich and the poor, and exacerbates the critical conditions of those in need. While a few powerful continue to pay as little as possible, billions of people are condemned to live in deeply deplorable conditions.

Our society as a whole is a victim of this harmful tax system that boosts the wealthiest people’s fortunes and increases hunger for the poor ones. Instead of working to narrow the gap between rich and poor, the current economy works for the benefit of a minority that has managed to conquer their wealth through tax evasion and avoidance schemes. In this increasing inequality context, society must demand transparency, fair tax rules for everybody and the end of tax havens abuses, that increase poverty by promoting anti-social manipulations. Finally, governments must implement actions that ensure an inclusive economic growth that helps disadvantaged people start overcoming the deep poverty conditions in which they find themselves today.

** This blog post is part of the international Tax Justice Blogging Day #taxjustice **

Alejandro Melita

1 United Nations Development Programme. “Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience.” Human Development Report, 2014. Web Accessed February 25, 2015.
2 BBC News “Oxfam says wealth of richest 1% equal to other 99%”. Web Accessed January 18, 2016.
3 London School of Economics Blog. Africa at LSE, LSE’s engagement in Africa. “Tax evasion: the main cause of global poverty”. Web Accessed March 7, 2014.