Bangladesh is one of the biggest victims of illicit financial flows for the past decade. The country lost a staggering Tk63,924 crore ($7.53 billion) a year between 2008 and 2017 to trade misinvoicing, equivalent to nearly one-fifth of its tax collection target for the current fiscal year, says Global Financial Integrity
Multinational companies avoid taxes in developing countries that cost those economies heavily, said a top official of a leading international organization.
"We know that aggressive tax avoidance by multinationals hits developing countries, particularly high, because they rely heavily on corporate income taxes," said Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development (OECD).
"Countries are losing $240 billion every year," Gurría told a high-level virtual meeting co-hosted by the United Nations, Canada and Jamaica.
Over a dozen heads of different states, including Canada, Germany, the United Kingdom, France and Japan, took part in the meeting followed by a panel discussion participated by heads of international institutions, such as the World Bank, the International Monetary Fund and the OECD.
Gurría talked about tax evasion by multinational companies when the panel chair asked him to shed thoughts on the illicit financial flows that hurt developing countries.
"We need to put an end to a fiduciary corporate structure, if necessary, needs to be tackled head on. We need to break down silos," said the secretary-general of OECD, a forum of 37 nations including many developed countries.
He also came up with a way out of the menace of tax evasion and illicit financial flows out of developing nations.
Initial thoughts of the plan, according to him, is that developing country needs to implement automatic exchange of information between each other, making tax evasion a thing of the past. He pointed out that over 100 countries are exchanging automatic information between them on accounts that worth over $5 trillion.
Gurría also said the OECD is ready to help developing countries design its own action plan and enhance the ability to tax multinationals.
He also proposed a rapid scaling up of tax inspection without borders, which according to him, can operate together with the UNDP or the UN.
"The idea would be, beyond audits and beyond tax collection in developing countries, we can address illicit financial flows and tax crime using data," said the OECD boss.
Bangladesh has been one of the biggest victims of illicit financial flows for the past decade.
The country lost a staggering Tk63,924 crore ($7.53 billion) a year between 2008 and 2017 to trade misinvoicing, equivalent to nearly one-fifth of its tax collection target for the current fiscal year, said Global Financial Integrity, a US-based think-tank, in a report in March.
Bangladesh ranked 33rd globally and 3rd in South Asia in terms of illicit outflow of money through trade misinvoicing, according to the GFI.
Another US-based research firm Wealth-X in its latest report said the growth of the number of high net-worth (over $5 million) individuals in Bangladesh topped the world with 14.3 percent between 2010 and 2019. Vietnam and China followed Bangladesh.
Earlier, IMF Managing Director Kristalina Georgieva told the meeting that economic contraction due to the pandemic may be worse than the IMF's earlier forecast of 3 percent.
She also said $100 billion left out emerging markets since the Covid-19 outbreak.
"We are exploring SDR [special drawing rights] to support poor countries," Georgieva said.
World Bank Group President David Malpass said there is no time to spend on discussion as he wants fast and broad action plans to tackle "unprecedented societal impacts" of Covid-19. He urged for additional financing to address extreme poverty and inequality.