Rachael Le Mesurier: Rich/poor gap has risen dramatically

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Image / iStock
Image / iStock

Here we are again, at the start of the World Economic Forum in Davos, warning about the global inequality crisis - and proposing steps to tackle it.

Yet again, Oxfam has released shocking new statistics that illustrate how severe this crisis has become: 62 people now have the same wealth as the poorest half of the planet - that's 3.6 billion people.

Others are raising the alarm. Consistently now, we hear concern on inequality from voices such as President Obama, the Pope, Christine Lagarde of the IMF, and people on the street. Things are starting to change. But not fast enough.

For all the talk, the gap between the rich and poor has grown dramatically in the past 12 months. This time last year Oxfam predicted that the wealth of the richest 1 per cent would overtake the rest of us by 2016, yet this milestone was passed in October.

The consequences of such rapidly growing and extreme inequality are huge. They have a significant effect on economic growth, slow poverty reduction efforts, and can spark social unrest. But the devastating impacts are most visible in developing countries - from the school children of South Africa whose education is suffering because of lack of government funding, to the garment workers of Myanmar who work exhausting hours for global suppliers, but who can't cover their rent and feed their families on what they earn.

The emerging inequality crisis is not a blip. It is the result of national and global policies and legislation that have reduced the ability to regulate for fair and equitable treatment between multinationals and small businesses, and for fair tax laws that apply equally to the very rich and those on low wages. It will take determination from political leaders, voters and consumers, and the active co-operation of business, to turn this around. However it is not hopeless.

2015 saw some exciting steps forward. In September, the world agreed an ambitious set of global goals at the UN, including specific goals to tackle inequality and poverty. There was also a very welcome engagement from business. The intentions are encouraging, but putting them into action and sustaining this direction requires us all to address the drivers of inequality and to challenge vested interests.

Top of that list of vested interests has to be tax havens. Although they are currently legal, they serve no social purpose. These jurisdictions - characterised inter alia by high levels of secrecy and low or no tax rates - are fuelling the rise in inequality. As tax returns from wealthy companies and individuals disappear into this global network, governments are left with two options: cut back on the essential spending needed to build healthy societies and economies; or make up the shortfall by levying higher taxes on those less wealthy. Consequently, wealth is redistributed upwards, and the inequality gap grows.

Tax havens siphon billions from rich countries. But it is in the poorer countries where the impacts are felt most dramatically. Wealthy Africans' use of tax havens cost African governments an estimated US$14 billion ($21.7 billion) in lost tax revenues in 2014. This is enough money to pay for healthcare that could save 4 million African children's lives a year and employ enough teachers to get every African child into school. Just because it's legal doesn't make it right.

Tax havens have become business as usual - 109 of the World Economic Forum's 118 partners have a presence in at least one tax haven. It's time we put a stop to this practice.

For the benefit of all their citizens, governments across the world need to commit to a second generation of tax reforms to end the race to the bottom on tax, and they need to end the secrecy around financial assets.

In 2010, 388 people had the same wealth as half the world. Now it's 62. If the trend continues to 2020, just 11 people will occupy this exalted position.

Across the world, many are choosing to no longer consign this to the "too hard" basket. It's time for the fairness of good tax systems to help us build a better world - and the meeting in Davos offers a real opportunity to put this into action.

Rachael Le Mesurier is the executive director of Oxfam New Zealand

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