Arab governments sustain an estimated $9 billion in annual revenue losses as a result of tax abuse by multinational corporations operating in the region, according to a policy brief by the UN Economic and Social Commission for Western Asia.
The brief reveals that multinational corporations have been shifting profits away from the countries in which they are being generated to minimize their tax liability, thus depriving Arab governments of their rightful revenues.
It also states that tax incentives, which have resulted in an average of 60% of corporate tax revenue potential being undercut in the region, did not dissuade the multinationals, which maintain their operations at the minimum scale that makes them profitable, from repatriating their profits.
What is even more troublesome, according to the brief, is that Arab countries continue to rely on the same tax and fiscal incentives to attract investors and compensate for inherent structural deficiencies in their economies.
The brief further highlights that the multinationals’ activities have not created proportionate increases in employment, noting that the losses are especially incurred in middle-income countries heavily reliant on tax for revenues.
The brief concludes that G20-led global corporate tax reforms can only yield modest revenues for the Arab region, as the proposed global reforms remain slanted in favor of the multinational corporations’ ultimate parent jurisdictions.
