As G20 leaders prepare to meet in London to try to agree how to maintain financial stability in the present economic meltdown, a new report reveals for the first time the massive global cost of tax dodging by big business.
New research commissioned by Christian Aid claims that billions of pounds are being lost each year to countries both rich and poor.
The report 'False Profits: robbing the poor to keep the rich tax-free', is a shocking indictment of a financial system that allows such abuse to thrive.
Author Dr David McNair, Christian Aid’s senior economic justice adviser, said today: "Paying as little tax as possible, regardless of the social consequences, has for many become an acceptable way of doing business. The money lost could be used to provide schools, hospitals and better living conditions worldwide."
Known collectively as “trade mispricing” the abuse involves manipulating figures to keep profits low in countries where they will incur a higher level of tax.
The major culprits are subsidiaries of the same parent multinationals filing false figures when they trade with each other, and companies that are independent of each other making secret deals to do the same thing.
"Much of the money flows via tax havens into the pockets of shareholders in the industrialised world," said Dr McNair. "All too frequently, the victims are poorer countries where the tax authorities have neither the expertise nor the resources to fight back."
The research, broken down by country and by trade sector, shows that between 2005-2007 the total amount of capital flow from bilateral trade mispricing into the EU and US alone from non EU countries was an estimated £581.4bn. If tax had been levied on this capital at current rates, the report states, non-EU countries would have raised £190.8bn in revenue.
Christian Aid says that the findings are consistent with its recent global estimate that trade mispricing deprives the developing world of US$160bn in tax each year. If allocated in the war against poverty according to current spending patterns, Christian Aid said the sum could save the lives of 350,000 children under the age of five annually.
