Tax havens are leading to significant financial losses for countries across the world. Both corporate tax avoidance and individuals’ offshore assets are contributing to these losses. Despite Hungary being considered a tax haven for companies due to its low corporate tax rate, almost five percent of the country’s domestic GDP has been moved to offshore accounts. The State of Tax Justice 2023 report continues the tradition of gathering data and sharing statistics on tax fraud and money evasion through offshore accounts. Globally, the annual tax loss is estimated to be around USD 472 billion, with multinational corporations shifting a substantial amount of profits to tax havens each year.
The extent of the problem is highlighted by the fact that the direct tax revenue loss to governments surpasses Hungary’s entire GDP. Hungary itself experiences significant financial losses due to offshore activities. While it has a nominal corporate tax rate of 9 percent, aggressive tax planning and avoidance tactics by companies and wealthy individuals result in an annual tax loss of about USD 1137 million for the country. Moreover, the amount of profit shifted out of Hungary is much higher, reaching roughly USD 3502 million annually. This contributes to Hungary’s position as a contributor to the global issue of corporate tax abuse.
The report shows that higher-income countries are responsible for 99.3 percent of the total taxes lost due to corporate tax abuse globally. Despite suffering losses themselves, lower-income countries only account for 0.7 percent of these losses. Hungary, despite being ranked 24th out of 37 countries in the Corporate Tax Haven Index, still plays a significant role as a moderately attractive destination for multinational companies engaging in tax avoidance practices.
Offshore assets, including bank accounts, investments, and real estate in foreign jurisdictions with favorable tax environments, are also a concern. Hungarian citizens possess offshore assets worth USD 7.7 billion, equivalent to 4.7 percent of Hungary’s GDP. Taxing these assets could potentially generate around USD 57.5 million in tax revenue annually.
In conclusion, tax havens are causing substantial losses to countries’ budgets worldwide, with both corporate tax avoidance and offshore assets contributing to the problem. Even countries like Hungary, with relatively low corporate tax rates, are facing significant losses due to aggressive tax planning and avoidance tactics.
