Mother and daughter at a very basic health clinic in Niger. Credit: Abbie Trayler-Smith/Oxfam

Cracking down on tax dodging, cracking down on poverty

General, Inequality, Private sector, Tax 1 Comment

Following the ‘Paradise Papers’ leak of financial documents Mark Goldring explains why Oxfam is calling for greater tax transparency. When businesses dodge taxes the poorest people suffer the consequences: lack of funding for public services.

Mother and daughter at a very basic health clinic in Niger. Credit: Abbie Trayler-Smith/Oxfam

Mother and daughter at a very basic health clinic in Niger. Credit: Abbie Trayler-Smith/Oxfam

Through Oxfam’s work fighting poverty around the world, I see the devastating impact that not having access to basic services like education, clean water and healthcare can have on the world’s poorest people.

For developing country governments, tax revenue from companies provides a significant share of the money they have available to train teachers, pay doctors and pipe clean water
This is why Oxfam campaigns for action to tackle the flaws in the global tax system that allow corporate tax avoidance to occur on a massive scale. For developing country governments, tax revenue from companies provides a significant share of the money they have available to train teachers, pay doctors and pipe clean water to people’s homes and villages.

According to the IMF, in wealthier countries corporate income tax is just 8 percent of government revenue, whereas poorer countries are more reliant on corporate income tax and it makes up 16 percent of government revenue. Governments would likely be able to bring in more revenues from corporate tax if companies were unable to shift profits to low tax jurisdictions elsewhere.

Just a third of the $100bn (approximately £78bn) tax that the UN estimates poor countries lose out on annually to corporate tax avoidance is enough to cover the bill for essential healthcare that could prevent the needless deaths of eight million mothers, babies and children.

Each year $30bn (approximately £23bn) is needed to pay for basic healthcare such as vaccinations, midwives and diarrhoea treatment that could prevent an average of 7.8m children and 210,000 women dying in 74 countries with large numbers of people living in poverty.

Greater tax transparency… would make it easier to verify whether companies’ tax bills are in line with their real economic activity in every country where they do business
Greater tax transparency would not stop all tax dodging but it would make it easier to verify whether companies’ tax bills are in line with their real economic activity in every country where they do business – and to hold them to account if not. This is the job of governments but companies have a role to play, too.

The UK-listed energy company SSE has stepped up and voluntarily opened up their books, demonstrating that a company can be both successful and transparent. Other large companies, such as Vodafone, Pearson and Lush Cosmetics have also voluntarily disclosed where they do business and where they pay tax.

We need all large companies to be as transparent as these select few. This will only happen when the government makes it mandatory through regulation.

Oxfam is urging the Chancellor to use next month’s Budget to commit to implementing tougher tax laws for UK and foreign-owned big businesses
 Oxfam is urging the Chancellor to use next month’s Budget to commit to implementing tougher tax laws for UK and foreign-owned big businesses that are operating in the UK, by the end of 2019. Many of these companies also operate in developing countries. As movement towards an EU tax transparency deal has stalled, we are calling on him to push ahead and build on the leadership some UK companies have already shown.

More than a year since the Government passed legislation to enable the introduction of comprehensive Public Country-by-Country Reporting for UK-based companies and nearly two years since the last Conservative government agreed the case had been made for the change, it is still no closer to being a reality.

The impact of UK action would be significant.

The legislation has the potential to cast a wide net, covering one in five of the world’s largest businesses because so many global companies have a substantial presence in the UK. This would shine a light on tax data that is largely invisible at present to many who want to scrutinise it – from campaigners to investors to poorer countries’ revenue authorities. In rich countries like the UK, our own HMRC spends a lot of time, money and effort trying to claim its fair share of tax from multinationals such as tech giants. But poor countries aren’t always included in information-exchange agreements with other governments, and often simply don’t have the resources to engage in lengthy legal battles.

I’m pleased that some UK businesses are voluntarily championing tax transparency – their efforts deserve recognition. Transparency is in everyone’s interest, except those who fear they have something to hide. Join me in calling on the UK government to make tax transparency the norm rather than the exception.

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Author
Mark Goldring

Mark Goldring

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Mark Goldring became chief executive of Oxfam GB in May 2013. As chief executive, he brings the issues faced by the world's poorest people to a global stage, meeting high level government and business leaders to influence them to act against the causes of poverty. He also provides leadership for Oxfam's programme work across the world, as well as our 5,000 staff and thousands of volunteers in the UK and overseas. Mark has decades of experience within international development: as chief executive of VSO; in the field for the United Nations Development Programme and the UK's Department for International Development and as Oxfam's country director in Bangladesh in the early 1990s. His most recent role was as chief executive of Mencap, the UK's leading disability charity. Mark read law at Oxford and has a Masters in social policy and planning in developing countries from London School of Economics. He was awarded a CBE in 2008 for services to tackling poverty and disadvantage.