The gap between the rich and the poor is extreme and growing. In fact, the number of billionaires across the globe has actually doubled since the 2008 financial crisis. Extreme inequality is a defining issue of our time but it is not inevitable; it is the consequence of political choices. There are tradeoffs. As the leaders of the world's largest 20 economies gather in Australia this weekend, they have the opportunity to make the right ones.
They can start by acknowledging that inequality is derailing the fight against poverty and threatening economic growth. In fact, G20 countries are now home to more than half the world's poorest people. Then the G20 countries can take action by cracking down on the use of tax havens and tax dodging by multinational corporations.
Having recently launched a new campaign to address inequality, Oxfam calculated that poor countries miss out on about US $100 billion each year because of corporate tax avoidance and tax breaks. That's enough to provide health care and primary school education to poor families and children worldwide. But it's lost.
Tax revenues are vital for investments in infrastructure, education and health in any economy. In developing countries, corporate tax revenue makes up a relatively larger share of developing countries' budgets, but loopholes in the international tax system allows multinational companies to stash their profits in tax havens, costing billions of dollars to developing countries and depriving their people from essential social services.
For example, in 2012, tax breaks for just six multinational firms doing business in Sierra Leone were equivalent to 59 percent of that country's entire budget, more than eight times its spending on health, and seven times its spending on education.
To fund essential services and tackle global inequality, we must ensure that companies pay their fair share of taxes. A first step is to compel corporations to publicly report where they earn their profits and where they pay taxes -- so-called country-by-country reporting. Only then will citizens be confident that everyone pays their fair share. Here in the U.S., only 55 Fortune 500 companies disclose what they would pay in taxes if they did not keep their profits booked offshore. Collectively, these 55 companies alone would owe more than $147.5 billion in federal back-taxes.
Another step is to publish registries of the real owners of shell companies to fight outright tax fraud. Shell companies are also used to hide money from a range of other crimes from drug trafficking to corruption, and the United States is a leading haven for foreign despots and their cronies. A World Bank study of 150 cases of large-scale corruption in the world found that 85 percent of perpetrators hid their proceeds with the help of companies whose owners couldn't be found. The United States topped the list of countries hosting these shell companies.
Most importantly, the G20 must work with all countries, not just the wealthy ones, to revamp the international tax system. Most developing countries are currently excluded from the policy process, while multinational corporations have the access to curtail the agenda and water down reforms.
We need global tax rules that work for the many, not the few. It is about making better tradeoffs. It is time for G20 nations to start to make the rights ones, beginning this weekend.