Dublin, Ireland. a protest outside the Department of Finance, nothing unusual there, only this time it was to do with Ireland’s most successful band. This protest saw members of the Debt and Development Coalition Ireland (DDCI) gathering Bono may campaign for a better deal for the world’s poor, but his band are taking advantage of the same tax avoidance schemes that rob impoverished countries of billions. outside the Merrion Street offices to voice their concern over U2’s tax avoidance. The coalition contains charitable organisations such as Trocaire and Oxfam (the world’s largest charity organisation) and they had clearly swallowed enough of Bono’s double standards. Nessa Ni Chasaide of Debt and Development Coalition Ireland said, “Bono may campaign for a better deal for the world’s poor, but his band are taking advantage of the same tax avoidance schemes that rob impoverished countries of billions.”
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Tax avoidance and tax havens like the IFSC are helping individuals and companies to avoid taxation through loopholes in the law or even employ illegal tax evasion methods :
Governments need tax revenues for investments in public goods and services like infrastructure, education, health care and a social safety net. These investments are of great important for national welfare, a good enabling environment for the private sector and for economic development in general. It is important that all individuals and firms, who are benefiting from these public services, contribute to this by paying a fair share in taxes.
Some companies nonetheless use aggressive methods to avoid taxation through loopholes in the law or even employ illegal tax evasion. The scope of worldwide tax evasion is enormous. In the book “Capitalism’s Achilles Heel”, Richard Baker, one of the most renowned American experts on the field of tax evasion and money laundering, calculates that every year US$ 200 billion of corporate revenues depart from developing countries without proper taxes being paid.
It has been estimated that more than half of all world trade is going through tax havens to avoid taxation. Tax havens play an important role in the worldwide problem of tax avoidance and evasion. They undermine development in other countries, including developing countries, in four ways:
- Secret bank accounts and offshore trusts in tax havens provide wealthy elites and companies with the means to escape their tax obligations. The big international banks and accountancy firms lend a hand by providing trust and tax planning services in tax havens;
- Multinationals’ ability to substantially lower their tax burden by routing capital flows through mailbox companies in tax havens provides them with unfair competitive advantages vis-à-vis their – often smaller – competitors in developing countries;
- Banking secrecy and offshore trusts offered by financial institutions in tax havens make it possible to launder the proceeds of political corruption, illicit arms deals, and other crimes;
- Tax havens have contributed to the rising incidence of financial crisis that can destroy livelihoods in poor countries. Tax havens have contributed to the rising incidence of financial crisis that can destroy livelihoods in poor countries.
Tax avoidance is a worldwide problem that needs to be addressed. Both governments and multinationals should take action to counter this problem. There is also an important task for civil society organisations to stimulate public discussion around tax avoidance and tax havens.