A recent report by the Tax Justice Network has exposed the extent of global tax abuse, revealing that Nigeria loses an estimated $492 billion every year due to multinational corporations and wealthy individuals exploiting tax havens. The 2024 State of Tax Justice report highlights how tax evasion is depriving governments, including Nigeria, of crucial revenue that could be used to fund public services, infrastructure, and development.
According to the report, Nigeria incurs an annual loss of $383.9 million from profit and tax losses linked to global corporate tax abuse. Of the $492 billion lost globally each year, $347.6 billion is attributed to multinational corporations that shift profits offshore to avoid paying taxes, while $144.8 billion is attributed to wealthy individuals hiding their wealth in offshore tax havens.
The report further emphasizes that multinational corporations are responsible for about a third of global economic output, half of world exports, and nearly a quarter of global employment. These companies’ tax abuse practices deprive governments of substantial tax revenue, which not only undermines public finances but also increases economic inequality both within countries and across borders. Small and domestic businesses are particularly hurt by this practice as they struggle to compete on an uneven playing field.
The report reveals that eight countries—Australia, Canada, Israel, Japan, New Zealand, South Korea, the United Kingdom, and the United States—are among the largest enablers of global tax evasion. These countries account for 43% of the total global tax losses. Despite being home to just 8% of the world’s population, these nations have opposed the United Nations tax convention that aims to close loopholes and curb global tax evasion, effectively hindering efforts to create a fairer global tax system.
Tax havens are central to these practices, and the report ranks them according to their role in facilitating tax abuse. The British Virgin Islands tops the list, followed by the Cayman Islands, Bermuda, Switzerland, Singapore, and Hong Kong. Mauritius, the only African country listed, is ranked 17th. In total, these tax havens enable the shifting of billions in profits away from countries that need the tax revenue most, including Nigeria.
The United Kingdom and its territories alone account for 26% of all global tax losses, costing countries an estimated $129 billion annually. This figure highlights the significant role that former colonial powers and their tax havens play in enabling global tax abuse.
Multinational corporations are increasingly shifting their profits into these tax havens, with recent data revealing that $1.42 trillion is being funneled offshore annually, resulting in a loss of $348 billion in tax revenue. This practice has continued despite attempts by organizations like the Organisation for Economic Co-operation and Development (OECD) to reform global tax rules. The report suggests that these reform efforts have failed to address the root causes of tax abuse, with multinational corporations continuing to find ways to evade taxes.
While offshore tax evasion by wealthy individuals has declined somewhat, the report notes that the vast majority of offshore wealth remains hidden from tax authorities. This means that governments worldwide are still losing significant revenue that could otherwise be used to address pressing issues like poverty, inequality, and infrastructure development.
The report’s findings underscore the urgent need for global cooperation to close tax loopholes and ensure that multinational corporations and wealthy individuals pay their fair share of taxes. By addressing these issues, governments could increase their tax revenues, reduce inequalities, and create a more equitable global economic system.
For African nations like Nigeria, the financial losses from global tax abuse are particularly damaging, as they limit the ability to invest in infrastructure, education, healthcare, and other essential services. Tackling tax evasion and ensuring that profits are taxed where they are generated is crucial for supporting sustainable economic growth and development across the continent.
As the global debate on tax justice continues, the Tax Justice Network’s report serves as a stark reminder of the scale of the problem and the need for stronger international action to combat tax evasion. Only through greater transparency, stricter regulations, and international collaboration can countries like Nigeria reclaim the billions of dollars lost to tax havens each year and secure a fairer financial future for all.
