UNDP Report: Multinationals Moved About $1tn Profits to Tax Havens in 2022
*Global losses in corporate tax revenue grow
Ndubuisi Francis in Abuja
Multinational companies may have shifted as much as $1 trillion of profits to tax havens in 2022, the latest Human Development Report (HDR) just released by the United Nations Development Programme (UNDP), has said.
The 2023/2024 HDR, titled ‘Breaking the Gridlock: Reimagining Cooperation in a Polarised World’, revealed the rebound in the global Human Development Index (HDI).
The HDI which is a summary measure reflecting a country’s Gross National Income (GNI) per capita, education, and life expectancy – has been partial, incomplete, and unequal, the report said.
Rich countries, the report stated, are also experiencing record-high levels of human development while half of the world’s poorest countries remain below their pre- COVID-19 crisis level of progress.
It explained that global inequalities are compounded by substantial economic concentration.
Global losses in corporate tax revenue have also skyrocketed since the mid-1990s as a result of profit shifting.
Profit shifting occurs when multinational companies reduce their tax burden by moving the location of their profits from high-tax countries to low-tax jurisdictions and tax havens.
As referenced in the report, almost 40 per cent of global trade in goods is concentrated in three or fewer countries; and in 2021 the market capitalisation of each of the three largest tech companies in the world surpassed the Gross Domestic Product (GDP) of more than 90 per cent of countries that year.
“The widening human development gap revealed by the report shows that the two-decade trend of steadily reducing inequalities between wealthy and poor nations is now in reverse. Despite our deeply interconnected global societies, we are falling short.
“We must leverage our interdependence as well as our capacities to address our shared and existential challenges and ensure people’s aspirations are met,” said Achim Steiner, head of the UN Development Programme.
“This gridlock carries a significant human toll. The failure of collective action to advance action on climate change, digitalization or poverty and inequality not only hinders human development but also worsens polarization and further erodes trust in people and institutions worldwide.”
The report argued that advancing international collective action is hindered by an emerging ‘democracy paradox’: while 9 in 10 people worldwide endorse democracy, over half of global survey respondents express support for leaders that may undermine it by bypassing fundamental rules of the democratic process, as per data analysed in the report.
Half of people surveyed worldwide report having no or limited control over their lives, and over two-thirds believe they have little influence on their government’s decisions.
Key findings in the report are that in 2023, all 38 countries that are members of the Organisation for Economic Co-operation and Development (OECD) achieved higher Human Development Index (HDI) scores compared to their levels in 2019.
Among the 35 least developed countries (LDCs) that experienced a decline in their HDI in 2020 and/or 2021, more than half (18 countries) have not yet recovered to their human development levels of 2019.
All developing regions have not met their anticipated HDI levels based on the trend before 2019.
According to the report, it appears they have shifted to a lower HDI trajectory, indicating potential permanent setbacks in future human development progress.
The impact of human development losses is in sharp focus in Afghanistan and Ukraine.
Afghanistan’s HDI has been knocked back by a staggering ten years, while Ukraine’s HDI dropped to its lowest level since 2004.
The report cited research indicating that countries with populist governments have lower GDP-growth rates.
Fifteen years after a populist government assumes office, the GDP per capita is found to be 10 per cent lower than it might under a non-populist government scenario.
