Towards the end of tax dodging?

12/04/2013 at 11:52 am 1 comment

Tax dodging by multinationals is finally becoming a hot topic in political debate.

In early April, news media reported on the first results of a major research project by the Washington-based International Consortium of Investigative Journalists. This project revealed deliberate tax dodging by a wide range of wealthy individuals, using the same tactics as a large number of global companies.

Also the OECD warned that the ease with which multinationals escape the tax authorities endangers governments’ income sources, and undermining their ability to recover from the financial crisis.

James Henry, a former chief economist at McKinsey has estimated that wealthy individuals and multinationals may have kept as much as $32 trillion from tax collectors globally   (see also this BBC article).

This is money deliberately withheld from governments, depriving countries around the world from crucial revenue and leading to the impoverishment of hundreds of millions of people in developing countries.

Christian Aid has found that, by reporting just a fraction of the profits they make in developing countries, multinationals reduce their tax bills to developing country governments by $160bn. In short, tax evasion by multinationals is leaving poor countries needlessly dependent on foreign aid and with fewer options to invest in services for poor people.

The Socialist and Democrat party in the European Parliament found that tax evasion within the EU amounts to some €860 billion a year.

The secrecy on which tax dodging relies must end. And the EU seems to agree. On 9 April, EU member states adopted new guidelines on the extractive industries that will require European oil, gas, mining and logging companies to publish what they pay governments around the world for natural resources. This is a landmark step towards greater corporate transparency. The next step should be to extend this agreement to focus on other industries that have a major impact on developing country economies – such as telecommunications and construction. And to include more financial information, for a fuller picture on corporate tax dodging.

Also read:

Entry filed under: EU, Government, Tax, Transparency. Tags: , , , , , , .

Margaret Thatcher and International Development Aid to poor countries falls further

1 Comment Add your own

  • 1. R Storey  |  13/04/2013 at 11:27 am

    This process of mandatory disclosure of taxes paid for extractive and other industries in developing countries is more important than aid flows and demands a greater commitment by our NGOs and Government than is evident so far.
    Just to add it as another option beyond aid because of cuts to Member States’ development budgets is to understate the need to tackle the current exploitation of weak tax systems by MNCs in countries reliant on ODA.
    The degree of support for this initiative is an acid test for development aid NGO’s – are they willing to look to do themselves out of business by really helping ensure that taxes are paid to illiminate poverty?.

    Reply

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