World Bank

The leaders of the World Bank and the International Monetary Fund (IMF) have warned that the industrial scale of international tax avoidance revealed by the Panama Papers represents a “great concern” for the global economy and is having a “tremendously negative effect on our mission to end poverty”.

Jim Yong Kim, the president of the World Bank, said the revelations that many of the world’s richest and most powerful people are avoiding paying millions in taxes by hiding money from the taxman in offshore havens is a “great, great concern” and “very, very damaging” to the bank’s “mission to end extreme poverty”.

“When taxes are evaded, when state assets are taken and put into these havens, all of these things can have a tremendous negative effect on our mission to end poverty and boost prosperity,” Kim said as he opened the Spring Meetings of the World Bank and IMF in Washington.

Christine Lagarde, the managing director of the IMF, said the Panama Papers, an unprecedented leak of 11.5m files from offshore law firm Mossack Fonseca, showed that “the [international tax] rules appear to be skewed towards” the global rich.

“Clearly what has resulted from the review of these Panama Papers indicates that however important [international tax rules to prevent] base erosion and profit shifting…it is unfinished business,” she said in an opening address to the meeting.

Lagarde said more global cooperation is needed to stop tax avoidance and to ensure “the net does not have little loopholes here and there”. “A lot of things have gone global but there is one thing that has not gone global and that is tax. It is still very much a local affair,” she said. “International cooperation really has to be significantly improved and we are happy to play our part.”

“When we issue a report that is flabbergasting, indicating that work needs to be done by the country there has to be follow-up.”

Kim said he and Lagarde are “working as aggressively as we can” to track down tax evaders, and warned anyone thinking about avoiding tax to be “very careful”.

“When former government officials leave a country and take stolen funds with them we have to track them down,” he said.

Kim said he had been to many countries where the only ones who pay tax are those “too weak to refuse”. “You see systems where the rich don’t pay and the poor do. There is a comprehensive problem that we have to tackle.”

“Transparency is not going to move backward,” he said. “The world is only going to become more and more transparent as we move forward.

“Be very careful and also understand that leaders in developing countries all over the world are telling us that they want to work with us very strongly to track down these illicit flows to make sure the fair share of taxes are being paid. To make sure much of these assets that are taken literally out of the hands of governments and the poor can be reutilised for tackling poverty and inequality.”