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Corporate Tax Dodging Cheats Africa Out of 6 Billion Dollars, Says Oxfam

LONDON, Jun 2 2015 (IPS) - G7-based companies and investors cheated Africa out of an estimated six billion dollars in a year through just one form of tax dodging, according to a new Oxfam report ‘Money talks: Africa at the G7’, released Jun. 2.

This is equivalent to three times the amount needed to plug the healthcare funding gap in the Ebola-affected countries of Sierra Leone, Liberia, Guinea and at-risk Guinea Bissau.

According to an Oxfam briefing paper release in April this year, an estimated 1.7 billion dollars is required to close the healthcare funding gap to improve dangerously inadequate health systems in these countries. This figure is based on raising spending to the recommendation of the World Health Organisation (WHO) that 86 dollars per capita is required to achieve the minimum package of essential services.

“Multinational companies, many with headquarters in the United Kingdom and other G7 countries, are cheating African countries out of billions of dollars in vital tax revenues that could help vulnerable people get decent healthcare and send their children to school” – Nick Brye, Oxfam’s Head of U.K. Campaigns

The new Oxfam report comes as G7 leaders prepare to meet their African counterparts at the annual summit in Bavaria, Germany from Jun. 8 to 9. African leaders from Ethiopia (Prime Minister Hailemariam Desalegn), Liberia (President Ellen Johnson Sirleaf), Nigeria (President Muhammadu Buhari) and Senegal (President Macky Sall) are scheduled to join an outreach session on Jun. 8.

Oxfam is calling for the leaders of the G7 countries – Canada, France, Germany, Italy, Japan, United Kingdom and United States – to include action for ambitious tax reform in discussions about how the group can support economic growth and sustainable development on the continent.

In the United Kingdom, Oxfam is part of a coalition that has been calling on the recently elected new British government to show leadership by introducing a Tax Dodging Bill, which would make it harder for U.K. companies to avoid paying tax in the countries in which they operate – practices which currently cost some of the world’s poorest countries billions each year.

The coalition, which includes ActionAid and Christian Aid in addition to Oxfam, is currently running a Tax Dodging Bill campaign.

According to Oxfam, a well-crafted Tax Dodging Bill would also make it harder for big companies to avoid paying tax in the United Kingdom, and could bring in at least 3.6 billion pounds (5.4 billion dollars) a year to the U.K. Treasury, the equivalent of 600 pounds (910 dollars) for every household living below the poverty line.

“Multinational companies, many with headquarters in the United Kingdom and other G7 countries, are cheating African countries out of billions of dollars in vital tax revenues that could help vulnerable people get decent healthcare and send their children to school,” said Nick Brye, Oxfam’s Head of U.K. Campaigns.

“To fund the fight against poverty and to tackle worsening extreme inequality, we need action to ensure big companies pay their fair share, here and in the world’s poorest nations.”

Oxfam also notes that existing international efforts to tackle corporate tax dodging, such as the BEPS (Base Erosion and Profit Shifting) process, led by the Organisation for Economic Cooperation (OECD) for the G20 group of the world’s major economies, will leave gaping tax loopholes.

It warns that these loopholes can continue to be exploited by multinational companies across the developing world and that many African nations have been shut out of discussions on BEPS reform and will not benefit from them as a result.

Oxfam is also calling for British Chancellor of the Exchequer George Osbourne to attend July’s Financing for Development Conference in Ethiopia which will play host to heads of states and finance ministers from around the world.

The talks, which will focus on how the international community will fund development over the next two decades, are an opportunity for governments to work together to start shaping a more democratic and fairer global tax system.

In 2010, the last year for which data are available, Oxfam says that companies and investors based in G7 countries avoided paying tax on 20 billion dollars of income through a practice called trade mispricing – where a company artificially sets the prices for goods or services sold among its subsidiaries to avoid taxation.

With corporate tax rates in Africa averaging 28 percent, this equates to nearly six billion dollars in lost revenues. In addition, developing countries as a whole lose around 100 billion dollars a year through tax avoidance schemes involving tax havens, according to the U.N. Conference on Trade and Development (UNCTAD).

“Reforming global corporate tax rules so that African governments can claim the money owed to them is vital to tackle extreme poverty and inequality and boost economic growth, said Brye. “That’s why Oxfam has been calling for a U.K. Tax Dodging Bill that would ensure U.K. companies do their bit to help poor families at home and in developing countries.”

Edited by Phil Harris   

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  • Jeff Kaira

    OK… I agree that tax evasion is horrible…BUT…tax revenue that could help Africa’s poor?…NO…rather tax revenue that could help presidents and their close buddies get healthcare priority and send their children to schools abroad!

  • Luc Lapointe

    The Pot calling the Kettle Black!

    I think it was a few weeks ago that an article came out that the World Bank was well invested in companies that were not so clean after all. Of all these companies that are using financial engineer to generate the most benefit possible to their shareholders and consumers; that every day accept the status quo as the best solutions for the moment — what is Oxfam actually advocating for!?!

    As much as we all believe that corporations should pay more taxes at the end of the day we should want to understand what this would look like!?? So let’s just imagine corporations would pay more taxes!

    1) Will they generate less profits or just raise the prize of goods or services?
    2) If they raise the prize … are consumers ready to take the hit?
    3) If they decide to pay more taxes and therefore reduce profits … not passing the cost to the consumers? would paying less dividends to shareholders who quite often are most likely the same people that work for development agencies … would these funds affect the people that depend on these pension funds?

    4) Does paying more taxes actually means that it will b well used for the purposed expressed in the report (i.e. education, etc) ….or maybe it would be better for corporations to direct the money to specific funds and not so much to general revenues or the host country (but only and only if there is an actual social deficits).

    Corporations never pay taxes….consumers do through the purchases of goods and services!

  • Blake Perrow

    So true. How else would their children learn how to cheat the next generation out of money.

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