Who suffers most: the developing-world dimension

If corporate tax avoidance were only a rich-country problem, it would still matter. But it is not. The countries that can least afford it lose the most, measured against what they have. A lower-income country loses, on average, about 36% of its public health budget to global tax abuse; a higher-income one loses about 7%. That five-to-one gap is the part of this story that most coverage in wealthy countries leaves out, and it is the part with the highest human cost.

The arithmetic elsewhere on this site is mostly drawn from the UK, the US, Canada, Australia, India and South Africa. This page widens the lens, because the heaviest burden of profit-shifting does not fall on the rich economies that dominate the headlines. It falls on the countries with the least capacity to absorb it.

Why poorer countries lose proportionally more

The core asymmetry is structural: corporate income tax is a bigger share of total government revenue in developing countries than in OECD ones. Lower-income states often lack the administrative machinery to tax the informal sector or to levy effective wealth taxes, so corporate tax carries more of the load. When that base is eroded, there is less to fall back on. The IMF estimates lower-income countries lose between 6 and 13% of their total tax revenues to base erosion and profit shifting, against 2 to 3% for OECD economies.

The starkest framing comes from the Tax Justice Network. Its State of Tax Justice 2023 found that lower-income countries' annual tax losses of about US$47 billion were equivalent to 49% of their public health budgets, against 9% for higher-income countries. The 2024 edition put the average loss for lower-income countries at 36% of public health budgets, against 7% for higher-income ones. Either way, the same loss that is a manageable leak for a rich country is a gaping hole for a poor one.

Losses are larger as a share of GDP, too

The IMF's 2015 research on profit-shifting found developing countries' losses were nearly three times as high in GDP terms as OECD losses, exceeding US$200 billion. Cobham and Jansky (2018) confirmed the pattern in peer-reviewed work, finding the greatest intensity of losses in low-income and lower-middle-income countries and across sub-Saharan Africa, Latin America and the Caribbean, and South Asia. Africa loses an estimated US$88.6 billion a year to illicit financial flows, on the order of 3.7% of GDP, a figure most precisely associated with UNCTAD's and the UN Economic Commission for Africa's work and the African Union's High Level Panel on Illicit Financial Flows (the Mbeki Panel, 2015).

How it is done to them

The mechanisms are the same ones explained on the structures page, but their effect is sharper where enforcement is weaker:

• Transfer mispricing. Extractive companies in particular manipulate the prices charged between group entities for commodities, services and management fees, shifting taxable profit out of resource-rich developing countries. A miner might sell copper from an African subsidiary to a group trading arm in a low-tax country at below-market prices, moving the profit with it.
• Treaty shopping. Many developing countries signed tax treaties, often under pressure from capital-exporting nations, that sharply limit their right to tax income leaving the country. The UK government's own evidence found developing countries lost over US$800 million in 2011 through treaties with the Netherlands alone. These treaties were typically negotiated with little capacity on the developing-country side.
• Thin capitalisation. Subsidiaries in higher-tax developing countries are loaded with intragroup debt, so large interest payments flow to related lenders in low-tax jurisdictions, stripping out taxable profit where the real activity is.
• Conduit FDI. UNCTAD estimated that about US$100 billion a year in developing-country tax losses relate to inward investment routed through offshore hubs, often the Netherlands, Luxembourg or the British Virgin Islands, that exist only to minimise source-country tax.

Tax as development finance: the argument that reframes everything

Here is the comparison that has moved the debate. The IMF's own Finance and Development analysis framed it plainly: developing countries lose roughly US$200 billion a year in corporate tax, more than the US$150 billion or so they receive each year in foreign development assistance. In other words, the system quietly takes back more than the aid it gives. Tax revenue is also more sustainable, more predictable and more sovereignty-preserving than aid: it is a country funding itself rather than depending on the goodwill of others. The Tax Justice Network, Oxfam, ActionAid and the African Union's Mbeki Panel have all built their case for UN-led reform on exactly this point. It is why so many developing countries backed the UN tax-convention process over the OECD's.

India, the worked example

India is the instructive case because it sits on both sides of the ledger. It is a significant loser from profit-shifting by foreign multinationals operating in India, with an estimated annual corporate tax loss of about US$21.4 billion. But it has also been a route: Indian outward investment historically used structures through Mauritius and Singapore, both of which had favourable treaty arrangements with India. The important part is what India did about it. In 2016 it renegotiated its double-tax treaty with Mauritius, withdrawing the capital-gains exemption that had powered the "Mauritius route," with the change biting on shares acquired from 1 April 2017. That is a developing country taking unilateral enforcement action and making it stick, evidence that the structural deck is not unchangeable, even if changing it is slow and hard.

Why the same companies face less scrutiny here

Developing-country tax authorities face a structural enforcement deficit: fewer transfer-pricing specialists, weaker access to the information-exchange networks that richer countries use, and limited legal capacity to challenge complex multinational pricing. The result is that the very same companies that meet rigorous scrutiny from HMRC or the IRS can operate with far less oversight in lower-income jurisdictions. The loss is not only larger in proportion; it is also harder to fight.

The point of this page

The version of corporate tax avoidance that gets discussed in London, Washington and Sydney is the rich-country version, where the loss is real but absorbable. The version that does the most damage is the one that rarely makes those headlines: a lower-income country losing a third or a half of its health budget, with less capacity to enforce, on rules its predecessors had little hand in writing. That is why the developing-world dimension is not a footnote to this story. On the measure that counts, the share of what a country has, it is the heart of it.

Key facts

• Lower-income countries lose about 36% of their public health budgets to global tax abuse (2024 edition); higher-income countries lose about 7%. The 2023 edition put the lower-income figure at 49% of health budgets, on US$47bn of losses.
• The IMF puts developing-country losses at 6 to 13% of total tax revenue, versus 2 to 3% for OECD economies, and nearly three times higher in GDP terms, exceeding US$200bn.
• Developing countries lose roughly US$200bn a year in corporate tax, more than the roughly US$150bn they receive in foreign aid (IMF Finance and Development).
• About US$100bn a year of developing-country losses relate to conduit FDI routed through offshore hubs (UNCTAD); Africa loses an estimated US$88.6bn a year to illicit financial flows (UNCTAD/UNECA, ~3.7% of GDP).
• India loses about US$21.4bn a year, yet renegotiated its Mauritius treaty in 2016 (effective for shares acquired from 1 April 2017), proving unilateral enforcement is possible.