Poor countries lose three times as much from multinationals' accounting practices as they get in aid. Sarah Morrison reports
Corporate tax avoidance is costing developing countries an estimated
£70bn a year, according to a coalition of more than a hundred leading
charities. If taxes were paid in full, campaigners suggest, the money
could be used to save the lives of 85,000 children under the age of five
in the world's poorest countries every year.
The figures, released days after the Prime Minister said tackling tax
avoidance was one of the UK's priorities for its G8 presidency, put the
scale of the issue worldwide into perspective. The actor and tax
campaigner Bill Nighy told The Independent on Sunday last week they were
"breathtaking".
He added: "[Developing countries] lose three times as much to tax havens as [they] receive in aid every year. [Hunger and poverty] are not inevitable. They are completely preventable. When you think about how these things happen – you look at that one fact, and understand how."
The star is backing the Enough Food for Everyone "If" campaign, which is urging David Cameron to tackle the root causes of hunger in the developing world. Mr Nighy said eliminating tax avoidance was one of the "greater ambitions" of the campaign, which wants to "stop people feeding toxically" on Africa and other developing nations.
"The whole thing hangs on whether we see ourselves as citizens for the world, whether we see ourselves as responsible for a situation," he said. "Hunger is almost like something the West does. It's almost like the direct result of the way the West performs. And in 2013, it's shaming that two million children, on average, die every 12 months when … we have everything we need."
While British MPs have cited Google, Amazon and Starbucks as companies that legally avoided paying tax in the UK last year, experts warn similar tax avoidance has an even graver impact in the developing world. The deaths of 1.4 million children in poorer countries since the turn of the millennium could have been prevented had multinationals paid their tax bills in full, according to the If campaign.
The Organisation for Economic Co-operation and Development (OECD) is publishing a report next month on the extent to which multinationals take advantage of global tax structures. Ben Dickinson, head of the OECD's tax and development programme, said developing countries often "don't have the basic frontline protection" against unfair profit shifting. "We are scratching the surface at the moment, but the demands for help are huge."
Zambia, Africa's biggest copper producer, announced last year it was losing almost £1bn annually through tax avoidance, with the mining industry the biggest culprit. Colombia and Vietnam recently revised legislation to protect themselves against "transfer pricing", which enables companies to avoid tax by making payments to each other within the same corporate structure. Colombia's tax revenues increased 76 per cent as a result, and in Vietnam one audit of a large multinational rose by almost £3m.
Alvin Mosioma, director of Africa's Tax Justice Network, said tax avoidance is "the biggest challenge" his continent faces. "[The fact that] many African countries are surviving by dependence on aid, despite the amount of resources flowing out of the country, is a scandal."
UK-based SABMiller, one of the world's leading brewers and the owner of Grolsch and Peroni, was accused by ActionAid of avoiding an estimated £20m of taxes in Africa and India in 2010. The company paid corporation tax in Ghana in just one of the four years from 2007 to 2010, according to the charity. SABMiller rejects the claim. Nigel Fairbrass, the company's head of media, said the collapse of local currency after the financial crisis, as well as increased costs, meant the business was then unprofitable. He added that the company has invested more than £45m in the business in Ghana, qualifying for capital allowance from the government and a reduction in tax.
Glencore, the world's largest commodity trader, came under scrutiny in 2011, when an internal report by the accountancy firm Grant Thornton into Mopani Copper Mines, a Glencore subsidiary in Zambia, stated there had been an "unexplainable" increase in Mopani's costs between 2006 and 2008 and that it "may be using incorrect disposal proceeds for tax purposes". Glencore denies avoiding tax, saying the report "contains fundamental factual errors".
Justine Greening, the International Development Secretary, said this weekend: "By driving a serious debate on tax evasion and avoidance, we can help poorer countries to receive the taxes they are due. This will help countries to fund public services and investment for all of their citizens."
Case study: 'If my wife sells merchandise at the market, she has to pay a tax. If companies aren't doing that, it's wrong'
Pepino Musakalu, 58, a father of seven, lives close to the Mopani mine in Kankoyo, the Copperbelt region of Zambia. He acts as secretary for a local NGO called Green and Justice.
"We are hearing that [certain companies] are not paying their taxes. If my own wife wants to sell merchandise at the market, she has to pay a fixed tax every day. If companies are not, it is wrong. And it's a shame.
"Some families here are headed by children; some have no form of income. The government could use those taxes. People are not happy."
List of shame
£70bn: The amount of money developing countries are estimated to lose each year to corporate tax avoidance
85,000: The estimated number of deaths of children under five that could be prevented each year if multinationals paid tax bills in full
3 times: Developing countries lose this much more to tax havens each year than they receive in aid
3,000: There are at least this many tax treaties in place around the world
He added: "[Developing countries] lose three times as much to tax havens as [they] receive in aid every year. [Hunger and poverty] are not inevitable. They are completely preventable. When you think about how these things happen – you look at that one fact, and understand how."
The star is backing the Enough Food for Everyone "If" campaign, which is urging David Cameron to tackle the root causes of hunger in the developing world. Mr Nighy said eliminating tax avoidance was one of the "greater ambitions" of the campaign, which wants to "stop people feeding toxically" on Africa and other developing nations.
"The whole thing hangs on whether we see ourselves as citizens for the world, whether we see ourselves as responsible for a situation," he said. "Hunger is almost like something the West does. It's almost like the direct result of the way the West performs. And in 2013, it's shaming that two million children, on average, die every 12 months when … we have everything we need."
While British MPs have cited Google, Amazon and Starbucks as companies that legally avoided paying tax in the UK last year, experts warn similar tax avoidance has an even graver impact in the developing world. The deaths of 1.4 million children in poorer countries since the turn of the millennium could have been prevented had multinationals paid their tax bills in full, according to the If campaign.
The Organisation for Economic Co-operation and Development (OECD) is publishing a report next month on the extent to which multinationals take advantage of global tax structures. Ben Dickinson, head of the OECD's tax and development programme, said developing countries often "don't have the basic frontline protection" against unfair profit shifting. "We are scratching the surface at the moment, but the demands for help are huge."
Zambia, Africa's biggest copper producer, announced last year it was losing almost £1bn annually through tax avoidance, with the mining industry the biggest culprit. Colombia and Vietnam recently revised legislation to protect themselves against "transfer pricing", which enables companies to avoid tax by making payments to each other within the same corporate structure. Colombia's tax revenues increased 76 per cent as a result, and in Vietnam one audit of a large multinational rose by almost £3m.
Alvin Mosioma, director of Africa's Tax Justice Network, said tax avoidance is "the biggest challenge" his continent faces. "[The fact that] many African countries are surviving by dependence on aid, despite the amount of resources flowing out of the country, is a scandal."
UK-based SABMiller, one of the world's leading brewers and the owner of Grolsch and Peroni, was accused by ActionAid of avoiding an estimated £20m of taxes in Africa and India in 2010. The company paid corporation tax in Ghana in just one of the four years from 2007 to 2010, according to the charity. SABMiller rejects the claim. Nigel Fairbrass, the company's head of media, said the collapse of local currency after the financial crisis, as well as increased costs, meant the business was then unprofitable. He added that the company has invested more than £45m in the business in Ghana, qualifying for capital allowance from the government and a reduction in tax.
Glencore, the world's largest commodity trader, came under scrutiny in 2011, when an internal report by the accountancy firm Grant Thornton into Mopani Copper Mines, a Glencore subsidiary in Zambia, stated there had been an "unexplainable" increase in Mopani's costs between 2006 and 2008 and that it "may be using incorrect disposal proceeds for tax purposes". Glencore denies avoiding tax, saying the report "contains fundamental factual errors".
Justine Greening, the International Development Secretary, said this weekend: "By driving a serious debate on tax evasion and avoidance, we can help poorer countries to receive the taxes they are due. This will help countries to fund public services and investment for all of their citizens."
Case study: 'If my wife sells merchandise at the market, she has to pay a tax. If companies aren't doing that, it's wrong'
Pepino Musakalu, 58, a father of seven, lives close to the Mopani mine in Kankoyo, the Copperbelt region of Zambia. He acts as secretary for a local NGO called Green and Justice.
"We are hearing that [certain companies] are not paying their taxes. If my own wife wants to sell merchandise at the market, she has to pay a fixed tax every day. If companies are not, it is wrong. And it's a shame.
"Some families here are headed by children; some have no form of income. The government could use those taxes. People are not happy."
List of shame
£70bn: The amount of money developing countries are estimated to lose each year to corporate tax avoidance
85,000: The estimated number of deaths of children under five that could be prevented each year if multinationals paid tax bills in full
3 times: Developing countries lose this much more to tax havens each year than they receive in aid
3,000: There are at least this many tax treaties in place around the world
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