From Washington, D.C., and Brasilia to Moscow and Madrid, the taxman is on a mission to squeeze more revenue from people, many of whom are struggling to make ends meet amid the worst economic slowdown since the Great Depression. He has his work cut out for him. That’s because tax evasion in all its many forms is so pervasive around the world.
How big a problem is tax evasion? Take a look at the table below from Tax Justice Network, a London-based watchdog that fights against tax havens. When combined with information from other academic, governmental and media sources, the full scope of tax evasion’s impact starts to become clear. And the results are surprising in a few ways.
Top 10 Countries Losing to Tax Evasion
($ MILLIONS) Size of
Economy (%) Tax burden
Overall (%) Tax lost as
a result of
($ Millions) U.S. 14,582,400 8.6% 26.9% 337,349 Brazil 2,087,890 39% 34.4% 280,111 Italy 2,051,412 27% 43.1% 238,723 Russia 1,479,819 43.8% 34.1% 221,023 Germany 3,309,669 16% 40.6% 214,996 France 2,650,002 15% 44.6% 171,264 Japan 5,497,813 11% 28.3% 171,147 China 5,878,629 12.7% 18% 134,385 U.K. 2,246,079 12.5% 38.9% 109,216 Spain 1,407,405 22.5% 33.9% 107,350 Source: Tax Justice Network
First, though politicians may disagree, the relationship between high tax rates and tax evasion isn’t so clear-cut. As David Cay Johnston of Reuters recently noted, “The United States has lower tax rates than eight of the nine other top 10 tax evasion countries [on Tax Justice Network’s list]. Rampant evasion in America raises doubts about the notion that high tax rates fuel evasion.” Indeed, countries with some of the lowest tax rates are among the most economically troubled, such as Ireland. Read