At a time when the global economy is experiencing an unprecedented succession of shocks (health and energy crises, inflation, geopolitical tensions, slowing growth), tax evasion continues to flourish. Tax havens are as welcoming as ever to multinational companies seeking to avoid taxes. According to the Global Tax Evasion Report 2024, published on Monday, October 23, by the EU Tax Observatory, almost €1 trillion in profits were recorded in 2022 in these countries that apply ridiculously low tax rates. More than one-third of the global profits made abroad by these companies thereby evaded taxation in their country of origin.
Over the past few decades, tax optimization procedures have never ceased to expand. The governments to which companies should logically pay taxes – since they conduct business within their borders – are experiencing a shortfall that represents almost 10% of global corporate tax revenues.
The international community has come to realize that this race to the bottom is a dead end. The idea that the richest people and multinationals don't pay their fair share undermines the social contract and erodes the general consent to taxation. What's more, these practices deprive governments of the tax revenues they need to finance social programs and the green transition.
Faced with these challenges, a vast global tax reform – launched under the auspices of the Organization for Economic Cooperation and Development in 2016, initialed by 140 countries in 2021, and approved by the European Union in December 2022 – is finally about to come into force. From now on, regardless of in which country a multinational declares its profits, these will ultimately be taxed at an identical minimum rate of 15%. Each country retains its sovereign right to set the tax rate it wishes, but if this is lower than the minimum global tax, the difference can be collected by the governments cheated by these practices. Tax havens thus in theory lose most of their attractiveness.
The reform is far from perfect. The search for a broad consensus has led to the application of a relatively low global tax rate, accompanied by exemptions that limit its scope. Nevertheless, it is a clear step forward. Just a few years ago, such a global agreement was simply unimaginable. An assessment of the reform will have to be made once it is fully in force, to highlight its shortcomings and make any necessary adjustments. Nevertheless, a global movement against tax evasion has been set in motion.
As far as wealthy individuals are concerned, the automatic exchange of banking information, introduced in 2017, has reduced offshore tax evasion. Of course, in the meantime, other loopholes have become popular, such as investing in real estate in a country other than one's own. Various optimization techniques also continue to enable the ultra-wealthy to benefit from very low tax rates compared with the rest of the population.
There is still a long way to go to restore fairness to a system that governments have let slide for too long. But tax evasion is not inevitable, it is the result of political choices. It is up to public opinion to keep up the pressure so that those in power ensure that everyone pays fair taxes.
Translation of an original article published in French on lemonde.fr; the publisher may only be liable for the French version.