Amid the current geopolitical and debt crisis, there is a pressing need to check tax evasion and illicit financial flows, especially by Asian nations, which lost an estimated €25 billion in revenue in 2016, OECD’s Tax Transparency report said on Thursday.

Quoting a study, the OECD report said 4 per cent of Asia’s financial wealth amounting to €1.2 trillion was held offshore, leading to a potential annual revenue loss of €25 billion for the region in 2016.

The Tax Transparency in Asia 2023: Asia Initiative Progress Report said that the current global landscape makes the fight against tax evasion and other illicit financial flows (IFFs) even more pressing in the aftermath of the Covid-19 pandemic, and the geopolitical crisis resulted in slower economic growth, increased government expenditure on public health, social and economic support, and other areas.

This resulted in reduced tax revenues and hindered states’ finances. With a deteriorated debt outlook and the rise in interest rates, the ability to finance the debt, in particular for developing economies, is challenging, while the fiscal space is reducing due to inflation, the report said.

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“Developing economies are particularly affected, as these flows deprive nations of crucial funds to pursue their development agendas. As governments plan on long-term recovery and resilience strategies, tackling more effectively tax evasion and other forms of IFFs is increasingly pressing,” it said.

According to the report, Asia accounted for 38.8 per cent of the estimated $7.8 trillion loss by developing countries due to IFFs between 2004-2013.

Tax evasion and other forms of IFFs are a global problem that hinders domestic revenue mobilisation. There is a widespread consensus that the scale of IFFs is significant and growing continually and regional initiatives to enhance tax transparency have proved to be highly relevant to tackle it, the report said.

The ‘Tax Transparency in Asia 2023’ report was launched at the meeting of the Asia Initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Currently, 167 jurisdictions are members of the Global Forum, which includes all G20 countries.

While the number of Asian jurisdictions members of the Global Forum has grown in the past decade (22 members today), 11 Asian countries have not yet joined the leading international body working on the global implementation of the transparency and exchange of information standards.

“Asian members have reported at least €20.1 billion in additional revenues since 2009. With more Asian members starting to use the EOIR (exchange of information on request) tool and to implement AEOI (automatic exchange of information), the additional revenues generated in this region are expected to continue to increase in the coming years,” the report said.

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