The US political dialogue tends to focus on the role of offshore tax havens in reducing revenue to the US Treasury. But less discussed in America is that big companies, many of which are headquartered in the US, use the exact same mechanisms to avoid tax payments in some of the poorest places on earth. The UN estimates that tax dodging by multinational companies costs developing countries $100 billion every year.61

It is not surprising that tax dodging hurts poor countries in particular. Earnings stripping techniques rob the source country, where the income is earned, for the benefit of the corporation’s owners who are usually in the United States or another wealthy country.

Taxes paid, or unpaid, by multinational companies in poor countries can be the difference between life and death, poverty or opportunity. $100 billion is four times what the 47 least developed countries in the world spend on education for their 932 million citizens.62 $100 billion is equivalent to what it would cost to provide basic life-saving health services or safe water and sanitation to more than 2.2 billion people.63

Some multinational companies operating in poor countries take advantage of loopholes to reduce their tax bills while simultaneously negotiating tax exemptions from governments desperate to attract investment and spur growth. Governments in developing countries give away an estimated $138 billion each year in statutory corporate income tax exemptions.64

Take, for example, Bangladesh. Poverty in the country is deep and widespread; almost half of the population lives on less than one dollar per day.65 It is ranked 142 out of 188 countries on the UN’s Human Development Index and is in desperate need of investments to help improve conditions for its people.66 The National Board of Revenue of Bangladesh estimates that multinational companies siphon off about $1.8 billion from the country each year through transfer mispricing, a widespread technique in which corporations manipulate the price of internal company transfers of goods and service between subsidiaries to dodge taxes.67 As a result, the government has been deprived of around $310 million every year in tax revenue. This sum could pay for around one-fifth (20.4%) of the primary education budget in Bangladesh – vital resources in a country where there is only one teacher for every 75 primary school-aged children.68

In Peru, an audit by the country’s tax administration of just 27 cases of transfer mispricing in 2013 revealed undeclared earnings of $350 million, representing an estimated $105 million in evaded taxes. If authorities could monitor and audit all transfer pricing operations the Peruvian government could collect an estimated $3.36 billion in additional tax revenues at that rate, equivalent to 84% of the country’s education budget.69

African leaders, including former UN Secretary General Kofi Annan, have pointed out that Africa loses more money each year to tax dodging than it receives in international development assistance. He has made vocal appeals to the international community for reform saying, “Africa has lost its tolerance for exploitation by the rest of the world. Africa's people expect a fair share of the wealth beneath their soil and territorial waters.”70