Christian Aid urges G20 to crack down on tax dodgers

|PIC1|According to the aid agency, tax dodging is costing developing countries around $160bn a year in lost revenue.

It attacks “unscrupulous” businesses that resort to tax havens and ‘trade mispricing’ – the practice of selling to subsidiaries in other countries at hugely inflated prices - to disguise their true profits and lower their tax liability.

Christian Aid is calling on G20 leaders to agree to reforms that will automatically reveal the identities of businesses and individuals with offshore funds as well as the amounts involved.

The aid agency also wants to see the introduction of new rules making it obligatory for companies and corporations to disclose their profits and the taxes they pay in each of the countries they operate in.

Although G20 finance ministers are due to discuss a new report on improving tax transparency by the Organisation for Economic Cooperation and Development (OECD), Christian Aid is sceptical that the report will lead to any significant change.

“In the past we have been dismayed at the OECD’s lack of ambition, and we don’t expect any major breakthrough,” said Dr David McNair, senior economic justice adviser at Christian Aid.

“The OECD is tasked with providing technical advice to the G20. All too often, however, it simply reflects the interests of the world’s wealthiest nations.”

Christian Aid is urging conference host Chancellor Alastair Darling to take the lead in bringing about tax reforms.

“Reform is vital,” said Dr McNair. “The revenues lost to developing countries at present could, if used according to current spending patterns, save the lives of 350,000 children under the age of five each year.”

The OECD proposes to use bilateral instruments like Tax Information Exchange Agreements (TIEAs) to improve the exchange of tax information among countries and make it harder for corporations to hide their money.

Dr McNair believes, however, that the agreements will not stop corporations from evading tax.

“TIEAs are not the way forward,” said Dr David McNair. “They are extraordinarily bureaucratic and riddled with get-out clauses.”

He further warned that only rich countries had enough tax officials and resources to implement TIEAs and force tax havens to sign up to them.

“The OECD is seeking to broaden the scope of TIEAs by making them multilateral,” Dr McNair continued. “It fails, however, to address their sheer unworkability.

“A new multilateral agreement on tax information sharing is needed in which information must be exchanged automatically, to ensure that developing countries benefit.”