That governments lose $500bn–$600bn a year to corporate tax dodging is more difficult to stomach than ever.

Date: 26 March, 2020  | Organisation: Christian Aid 

As the coronavirus pandemic worsens, governments around the world are scrambling to keep their economies afloat. Doing so will cost money – and lots of it.

Germany, for example, has stated it will spend whatever is needed to save its economy – and has announced 600bn of “virus aid”; the UK has promised £350bn worth of interventions and has implied there is more to come; and the US has approved a $2trn stimulus package, including $250 billion for direct payments to individuals and families, $350 billion in small business loans, $250 billion in unemployment benefits and $500 billion in loans for distressed companies.

Globally, other countries are announcing similarly impressive – and expensive – economic interventions.

For governments, then, every scrap of revenue is critical – which makes the fact that they lose between $500bn and $600bn a year to corporate tax dodging (and that $7trn of private wealth is hidden offshore) more difficult to stomach than ever.

However, the price of our collective failure to tackle tax evasion and tax avoidance is not limited to the cost of safeguarding our economies. As health systems around the world strain under the overwhelming pressure of Covid-19, it’s clear just how much we depend on strong, well-resourced public services in times of national crisis.

Rather than being crammed into the already over-stuffed coffers of unscrupulous multinational companies and individuals, the money lost through illicit financial flows (IFFs) could have been used to properly equip hospitals and train health workers – as well as to bolster other public services, such as social care and community support.

Sadly, this didn’t happen. Instead, in the UK, the NHS goes chronically underfunded; in the US, a wasteful and inefficient private healthcare system has made health a luxury rather than a right; and throughout Europe, hospitals routinely struggle to access the resources they need.

As ordinary citizens experience their public services collapsing, those profiting from tax avoidance and tax evasion remain largely insulated against the effects of the virus. Able to pay for private healthcare, stock up on essential provisions and avoid areas where contagion is most likely (such as shops, public transport and workplaces), the wealthy’s experience of the pandemic is worlds apart from the majority’s.

Though stark enough in the developed world, the gulf between the rich and the poor in the global south – already patently immoral – may ultimately prove to be tragic.

To date, largely through sheer geographical luck, the global south has avoided the worst ravages of the coronavirus. Sadly, this situation is unlikely to last.

As the virus continues to spread, experts are warning that next in line could be some of the world’s most vulnerable people. Lacking even basic health care provisions, a coronavirus outbreak in these countries will be catastrophic.

About one billion people (that’s 30 percent of the world’s urban population) live in slum-like conditions. With little ventilation, drainage and sewerage facilities, diseases spread quickly and easily in these environments – and so-called “social distancing” will be impossible.

Perhaps even more worryingly, three billion (that’s nearly 40 percent of the global population) lack basic hand washing facilities.

For this vast number of people, watching the coronavirus shut down country after county in the developed world must be terrifying.

But things needn’t have been this bad. According to Christian Aid’s Trapped in Illicit Finance Report, public revenue losses from IFFs in developing countries amount to around $416bn annually. While it’s too late to reappropriate that money, the lesson couldn’t be clearer: there is a huge human cost to tax evasion and tax avoidance.

Presently, African countries, for example, have access to just one percent of the world’s financial resources for health, but bear 24 percent of the global burden of disease. In 2019, cash-strapped governments struggled with a health financing shortfall of $66bn a year.

In India, it’s estimated that around 600 million people fail to access the health services they need, and healthcare investment is historically less than one percent of GDP.

With figures like these, the true value of the $416bn lost from the global south to IFFs every year suddenly pops into focus.

If anything good can come from this crisis, it should include a focused and committed global declaration to eliminate tax evasion and tax avoidance.

That’s a good long-term goal. In the meantime, to give the global south the best chance of weathering the incoming coronavirus health crisis, the International Monetary Fund and the World Bank should delay loan repayments and allocate new loans (and grants) to the poorest countries. Thankfully, it looks like that will happen.

To find out more about IFFs, see Christian Aid’s Trapped in Illicit Finance report.