While inequality between countries has actually declined over the last two decades, it still remains alarmingly high. According to the World Inequality Report, the average income of the world’s richest 10 per cent of countries remains 38 times higher than the average income of the world’s poorest 50 per cent of countries – a gap that is as wide as it was in the early 20th century. Today, South and Southeast Asians have an average income that is half that of the world average (and they work more hours for this income too). Meanwhile Europeans and North Americans earn 215 per cent and 315 per cent of the world’s average income respectively.
Reducing inequalities is a common goal for the international community. This was underlined by world leaders in 2015, when they adopted the Agenda 2030, which includes the 17 Sustainable Development Goals (SDGs). Goal 10 specifically focuses on inequality and commits world leaders to “Reduce inequalities within and among countries”. The SDGs also include commitments to combat more specific types of inequalities. Importantly, through Goal 5, world leaders stated their aim to “Achieve gender equality and empower all women and girls”.
Despite these commitments, many gaps remain, and recent disruptions – from the Covid-19 pandemic to the war in Ukraine – have only made matters much worse. In his 2022 Assessment of Progress towards the SDGs, the Secretary-General of the United Nations highlighted that: “The COVID-19 crisis has exacerbated global income inequality, partly reversing the decline of the previous two decades. Weak recoveries in emerging markets and developing economies are expected to raise between-country inequality.”
A key driver – Tax dodging and illicit financial flows
Inequalities around the globe are made worse by an economic system that allows for some major losses of public resources. The Tax Justice Network estimates that US$ 483 billion is lost to tax avoidance and evasion by multinational corporations and wealthy individuals globally every year, and other illicit financial flows add to this sum. These vast losses of potential public revenue have a disproportionately negative impact on lower income countries, where these sources make up a larger share of budgets.
Outdated, opaque and biased rules make these losses possible. Deep inequalities in global decision-making on tax matters – including the fact that developing countries have not been able to participate on an equal footing in international decision-making in the past – have resulted in global tax standards that are particularly ill-suited for the world’s poorest countries and deny them the resources they need to address inequalities effectively.
As part of the Sustainable Development Goals, governments around the world have recognised the importance of mobilising the resources needed to fund their goals. To this end, they have committed to significantly reducing illicit financial flows by 2030. The commitments adopted in the Addis Ababa Action Agenda of the United Nation’s Third International Conference on Financing for Development in 2015 expand on this, committing countries to combat tax evasion and corruption and reduce opportunities for tax avoidance. Both processes have committed to increased international cooperation on these matters.
However, in practice the international governance on global tax rules and standards has been dominated by bodies where most lower income countries do not have an equal say, including the Group of 20 (G20) and the Organisation for Economic Co-operation and Development (OECD), also known as the “rich countries’ club”. While the OECD-led process does allow some possibilities for developing countries to participate, in practice, over one third of the world’s countries have not been a part of the process. Those countries that are included have been subject to unfavourable conditions in order to participate. The situation started to change in 2022, when a historic decision on international tax cooperation was adopted by consensus at the UN General Assembly. This breakthrough came in the form of a resolution that had been tabled by the Africa Group and includes the establishment of an intergovernmental UN body on tax.
Civil society organisations (CSOs) in the tax justice movement have a strong vision for turning inequalities around through a fairer global tax system. This vision is worked out through:
We intervene in international fora such as UN meetings, meet one-on-one to talk tax with decision-makers, share our research and aim to persuade those with the power to make changes to the system.
Who wants to hear about global tax rules? The realities of this unjust system are hidden behind layers of complexity, dull accounting and poor transparency. We help the general public to understand the glaring consequences of this opaque system. Focusing attention on the issues through conventional and social media helps to turn the tide in public opinion and put pressure on decision-makers.
We analyse the impact of tax policies, collect information about the harmful practices of tax havens and develop solid proposals for alternatives.
We bring together CSOs from around the world to share information, carry out joint actions and raise our voices together. We also build connections with other sectors, showing how tax justice can be transformative for achieving goals for poverty alleviation, gender justice, climate action and more.