Campaigning at home is the route to tackling poverty abroad

Tax avoidance costs developing countries billions every year. So this week 16 domestic and internationally focused organisations have joined forces to launch a campaign for a Tax Dodging Bill.

Toby Quantrill
27 January 2015

When I mention in the course of a conversation that I work for an international development charity, I often get an enthusiastic response, saying how rewarding it must be to help dig wells, paint schools and hand out mosquito nets.

The truth is that I do find it rewarding – but the way my work contributes is probably somewhat different than the popular perception. Most of my work is office-based, researching the causes of poverty and inequality, and working with others to identify solutions and present those in a way that can lead to change.

Aid can change lives – there is no doubt of that. Debt relief where it has happened has led to increased social spending. But the most sustainable and effective form of long term finance for tackling poverty abroad (or for that matter in the UK) is progressively collected, accountably distributed, tax.

The trouble is that—at home and abroad—billions of pounds that could be spent providing infrastructure to provide a better life for all is instead lining the pockets of the rich. Nor is this going unnoticed. In a recent poll, a huge majority—85% of people—say that tax avoidance by large companies is morally wrong even if it’s legal - figures that hold across the political spectrum. Conversely only 1 in 5 people believe political parties have gone far enough in their promises to tackle tax avoidance.

The shift in public mood coupled with campaigning so far has prompted some significant but nevertheless incremental progress; last year for example, the OECD proposed that companies should collect data on their taxes and profits in each country they operate. Unfortunately they did not go so far as to oblige them to make this information public, therefore maintaining the shroud of secrecy. 

The Government has also introduced legislation which would make it publically known which individuals own which companies, helping to identify the kind of ‘shell companies’ that can be used for corruption and tax dodging. Unfortunately this has not yet extended to the UK’s Overseas Territories.  

Then most recently the UK Government announced a Diverted Profits Tax (AKA “Google Tax”) in December 2014, but once again, it is still weakened by what we’re calling the ‘Luxembourg Loophole’ for loan arrangements, and it seems unlikely that it would stop the kinds of tax arrangements exposed by last year’s “Lux Leaks”.

So there is a long way to go, and to ratchet up the pressure this week 16 domestic and internationally focused organisations have joined forces to launch a campaign for a Tax Dodging Bill, packaging together a series of measures to help tackle tax dodging in its various manifestations and to challenge the provision of unjustifiable tax breaks for large companies.

As we have been doing for many years, we’re still calling for public disclosure of country by country reporting, as well as a review of corporate tax breaks, a tightening up of anti-tax haven rules and a heightening of penalties for those who those who don’t play by the rules. We estimate that billions could be returned to developing countries as a result, and £3.6 billion for the UK - the equivalent of £600 for every household living below the poverty line.

And the great thing is that you don’t have to fly to the other side of the world to help dig those wells, paint those schools or hand out those mosquito nets. In fact you don’t even need to have any skills in those things, because outside of humanitarian emergencies, providing health and education infrastructure is best led by the governments of the countries concerned rather than international visitors.

What we can do is help those countries recoup the tax they are due, by acting on the knowledge that the best type of charity is justice.

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