27 April 2020

Tax justice in a time of crisis

When the UK Prime Minister, Boris Johnson, was recently admitted to hospital with covid-19, spending a few days in intensive care, a number of British politicians and journalists talked about how the virus was the great leveller. Everyone from street cleaners to world leaders could get the disease, no one was immune, therefore, we must all follow the same social distancing guidelines. But of course, as Iñigo Aymar of Oxfam has pointed out, covid-19 is not so much the great leveller, but the great revealer.

It has not demonstrated how we are all the same but has instead revealed how we are all very different. For the true significance of the crisis is the inequities it has highlighted in our social and economic landscape. One of the most striking of these are the financial inequalities that preceded this crisis. The most recent Oxfam inequality report showed us that just 22 men held the same wealth as all the women in Africa, and that if we taxed an additional 0.5% on the wealth of the richest 1%, that could pay for the 117 million jobs in healthcare, education and social care globally that are required to deliver the SDGs. Such huge wealth disparities mean that as millions lose their jobs in response to coronavirus, the impact of that financial shock will not be felt equally. It is simply shocking that in their economic responses too many governments seem to be more concerned about the price of shares than the price of bread, more concerned about falling stocks for the wealthy than rising deaths among the poor. If you’re sitting on billions and lose a million or two, your fundamental livelihood will not change; if you’re just about managing, but lose your job – especially in a country with an inadequate safety net – then your very life will be threatened.

Perhaps most troublingly, it has also revealed the global inequalities in our health systems. Many so-called developed countries have been able to rapidly scale up their existing, relatively strong healthcare provision, especially in regard to intensive care beds. The United Kingdom has built a series of new hospitals in just weeks, providing hundreds of extra ventilators for the most seriously ill. Inevitably, this will mean fewer deaths overall. By way of contrast, while Kenya has just a couple of hundred ventilators for approximately 50 million people, the UK has several thousand for a similar size population and these are being rapidly increased to tens of thousands.

In response to all this there is then an urgent need to develop both an immediate response but also a longer-term reframing of our economic and political systems. A number of excellent proposals have been made as to how to do this, especially in regard to cancelling global south debt, but I want to focus on how we can use the tax system to generate a more just political economy.

1. Change the global tax rules
The first issue is that we need to change the global tax rules. It has been estimated that tax dodging by multinationals costs the developing world up to $400bn each year – three times the amount that is given in aid to those countries. Reform of these rules is currently being discussed in a process led by the OECD (Organisation for Economic Co-operation and Development). Proposals led by India, Colombia and Ghana on behalf of poorer nations will ensure that developing countries get more of the tax that they are owed but other proposals, including those of the US, will keep things as they are and developing countries will lose out. In light of coronavirus and its disproportionate burden on the poorer parts of the world it is imperative that when these rules are changed that this is done in such a way that poorer nations benefit the most, keeping much more of the tax that is owed to them.

2. Tackle the tax havens
At least $8 trillion is currently sitting in tax havens around the globe. Much of this money has been obtained by illicit means and/or by avoiding tax that should have been paid in other countries. Led by the UN, the global community could decide to tackle these offshore gold mines once and for all and so provide funds for tackling the current health crisis. This could involve a range of measures including one-off (or even recurrent) taxes on net wealth such as Oxfam suggest; conditional corporate bail outs so that only those companies who refuse to use tax havens can access them; implementation of a global minimum corporate tax rate so that tax havens can no longer provide preferential rates; strengthening of national tax authorities so they can chase down those who hide their money offshore. As indicated, all of this activity could release billions of dollars to help fund a response to coronavirus

3. Institute an excess profits tax
During the first world war, a number of Western governments instituted a temporary super-profits tax to help fund the war effort. Arguably, a parallel situation exists today. One of the things that is increasingly clear is that the impact of covid-19 is not being felt equally across the corporate sector. While many companies are struggling significantly with a loss of consumers, others are making huge gains in response to the crisis. Amazon, one of the worst corporate tax avoiders in the world, has seen its share price increase by over 30% and is currently making $11,000 a second from its customers. Government could then implement an excess profits tax – perhaps as high as 75% - on these extra profits, and then use that money to fund a global response to the crisis.

In 2 Corinthians 8:14 when the apostle Paul was encouraging the Corinthian church to help out their brothers and sisters in Jerusalem who were dealing with their own famine-related crisis, he said 'the goal is equality'. I think that can be our mantra too. In whatever way we respond to coronavirus, the goal must be an equitable financial, health and social system – a just world in which we all have a chance to survive, if not flourish. That is the goal for which we must strive.
 
Dr Justin Thacker
National Coordinator
Church Action for Tax Justice

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