BREAKING: Power, Profits and the Pandemic
The coronavirus pandemic has laid bare an economic model that delivers profits for the wealthiest on the back of the poorest, with our new report ‘Power, Profits and the Pandemic’ showing 32 of the world’s largest companies stand to see their profits jump by USD $109 billion more in 2020.
We are at a critical juncture. We have a choice between returning to ‘business as usual’, or learning from this moment to design a fairer and more sustainable economy. We believe now is the time to take a good, hard look at the system we have, and start adapting it to become a fairer economy that works for all.
The coronavirus affects us all, even princes and prime ministers.
But the equality ends there.
The economic fallout from the COVID-19 pandemic could push half a billion more people – or 8 per cent of the global population – into poverty unless urgent action is taken to support developing countries.
Oxfam’s report, Dignity Not Destitution reveals that in East Asia and the Pacific, 240 million more people could be forced below the poverty line.
The crisis is showing deep and growing inequalities and unchecked this crisis will cause immense suffering.
- Over half the global population could be living in poverty in the aftermath of the pandemic.
- This could set back the fight against poverty by a decade, and as much as 30 years in some regions such as sub-Saharan Africa, the Middle East and North Africa.
- Women are likely to be hardest hit financially, due to unpaid care work, and the fact they are more likely to be employed in poorly paid, precarious jobs that are most at risk. More than one million Bangladeshi garment workers – 80 per cent of whom are women – have already been laid off or sent home without pay after orders from western clothing brands were cancelled or suspended.
However, together we can rebuild a better world. A fairer world. A more sustainable world. One that radically reduces the gap between the rich and poor. We need universal healthcare and universal social protection.
Together we can learn the lessons from this unprecedented crisis, to build a more human economy and a fairer world.
The Australian Government had already taken very welcome measures to provide financial security to millions domestically. However, we need support to be extended beyond our borders, where the needs will be much greater.
Many governments across the globe simply don’t have the financial firepower to do the same for their own people. Australia needs to do its fair share to protect the most vulnerable across the globe.
Now is the time to boost our aid budget, and to fully fund the UN’s Global Humanitarian Response Plan. Australia’s contribution to this global crisis should amount to $84 million. This money will not only save lives, but will help prevent millions more people falling into poverty.
The extreme divide between rich and poor is undermining progress against poverty, damaging economies around the globe and causing public anger and unrest, especially as climate-related disasters become more commonplace.
Our January 2020 research shows there is still serious economic inequality in Australia and globally.
Did you know?
The Australian Tax Office estimated the tax gap (tax not paid) by large corporations and businesses in 16-17 was AUD $2 billion. This is the same as the entire National Bushfire Recovery Fund established by the Federal Government in 2020.
In Australia the richest 1% (250,000 people) have more than double the wealth of 50% of our population (12.5 million people) and own nearly USD $1.6 trillion. That’s 22.2% of all of Australia’s wealth.
The Global Picture
The wealthiest 1 per cent of people in the world have more than double the wealth of 6.9 billion people. This is not fair or sustainable. The vast gap between the few rich and many poor in the world can’t be resolved without deliberate policies aimed at tackling inequality, and too few governments are committed to implementing these – ours included.
Why is inequality a problem?
With extreme wealth comes the power to influence the rules.
That means that we end up with government policies that favour the super-rich, regardless of what would work best for the rest of us. These policies increase poverty and create economic instability (as we saw with the recent financial crisis).
So extreme inequality isn’t just unfair — it’s downright dangerous. In developed and developing countries alike, the lowest tax rates, the best health and education and the opportunity to influence are being given to the rich and their children.
The impact of extreme inequality is most keenly felt in developing countries where missing out means remaining trapped in the cycle of extreme poverty. It’s estimated that tax dodging by multinational companies costs the world’s poorest countries at least USD $100 billion every year.
On its own, that’s a staggering figure. But when you consider how many more girls and boys could go to school and access better hospitals with this money, it becomes truly shocking.
But such deep inequality is not inevitable, and it can and must be reversed quickly.
Governments – including ours – need to make sure that large companies are forced to be more transparent about their dealings and properly taxed. This will mean money to go towards schools, hospitals and other services both here and overseas.
Who pays the price for inequality?
All of us.
Right now, Australians are seeing the direct results of economic inequality. Over the past decade the number of billionaires in Australia has tripled, while real wages have stagnated.
Oxfam is committed to tackling poverty and inequality in Australia and overseas – but we have a broken economic system that is concentrating wealth in the hands of the rich and powerful. Our wealth and growth is not being properly distributed to ensure that all Australians enjoy a decent life.
The Australian Tax Office estimated that in 2016-17, large corporations avoided paying $2 billion in taxes – the same amount as the entire National Bushfire Recovery Fund. Tax dollars contribute to this fund.
Given the state of inequality in Australia and abroad, and the context of worsening climate related disasters, such as the bushfires, the Australian Government must ensure that multinational corporations are paying their fair share of tax. This would boost public funding to allow it to provide better services to all Australians and better respond to disasters, both here and across the world.
Women and girls
At a global level, inequality is shockingly entrenched and vast, often affecting women and girls the most.
Almost all the super-rich are men. Dangerous, poorly paid work for the many is supporting extreme wealth for the few.
While women’s work is the bedrock of our economies, they do not see the benefits.
“The size of your bank account should not dictate how many years your children spend in school, or how long you live – yet this is the reality in too many countries across the globe. While corporations and the super-rich enjoy low tax bills, millions of girls are denied a decent education and women are dying for lack of maternity care.”
– Winnie Byanyima, Former Executive Director of Oxfam International
But when multinationals don’t pay their fair share of tax, they make it much harder for developing countries to build stronger and healthier communities. Globally, multinationals are stealing USD$172 billion from developing countries every year and Australian companies account for a substantial amount.
In Buried Treasure, Oxfam’s latest report published with the Tax Justice Network and the Uniting Church in Australia, it is estimated that more than $1 billion in profits was shifted out of Africa to tax havens by Australian mining companies in just one year (2015) – equating to up to almost $300 million in tax revenue that could have been used for vital services such as schools and hospitals.
The report also highlights the extent to which the tax affairs of too many of Australia’s mining giants remain cloaked in secrecy. The report shows the majority of Australian mining companies simply do not publish enough tax information for anyone to understand their tax payments and practices around the world. The available company data used in the report can be accessed here.
There is an urgent need for mandatory public tax transparency that would make it clear what taxes these companies pay and where. This shines a spotlight on companies’ affairs and makes it harder for them to avoid paying taxes.
What causes inequality?
It’s a complex picture but some of the key drivers of economic inequality are:
- A shift in what’s valued in many countries – there’s been a greater financial return placed on money and assets (capital) than on work
- Governments cutting the tax rates for money made on capital at the same time as people with that capital taking steps to avoid the tax they should pay
- Wages for the top earners skyrocketing while the wages of average workers barely change, and crucially;
- Individuals and firms who have the capital using their power and position to have the rules changed in their favour.
What can we do to address inequality?
Oxfam’s inequality report shows that globally governments can exacerbate inequality by underfunding critical public services like schools and hospitals, whilst setting the lowest tax rates for companies and the super-rich have seen in decades.
Just like in Australia, developing countries need tax revenue to pay for essential public services like healthcare, education and clean water for everyone. But when corporations don’t pay their fair share of tax, they make it much harder for developing countries to build stronger and healthier communities.
Tax avoidance is reprehensible but these companies are not necessarily breaking any laws. That’s why we are asking the Australian government to change the rules, making it harder for companies to avoid paying the taxes they owe.