• Time to make global tax rules work for the poor

    Posted by Jennifer

    4 June, 2013

    Why does Marta Luttgrodt pay more tax on her informal kiosk business than a multi-billion dollar multinational corporation like SABMiller in Ghana? Why do developing countries lose around USD 160 billion each year due to just two forms of corporate tax evasion (transfer mispricing and false invoicing)? Does more than half of world trade really pass through tax havens as it appears to on paper? How can the Cayman Islands be home to around 57,000 people but have 92,000 registered companies?

    It's pretty clear that the global tax system is broken. 

    When the wealthiest individuals and corporations avoid paying their fair share of tax in the countries where they operate, it is left to smaller businesses and poorer individuals to pay more in tax, or do without the services that governments provide. Corporate tax evasion has a particularly diabolical effect on poor countries. If the governments invested the money they lose to corporate tax evasion according to current spending priorities, it could save the lives of 350,000 children each year.

    We have been campaigning for an end to tax evasion and corruption, starting with requiring all multinational corporations to report on everything they earn and pay on a country by country basis (instead of through globally aggregated reporting as they currently do). Country by country reporting is a vital reform that would enable citizens and governments to see how much tax corporations are paying, and have a better chance to crack down on aggressive tax avoidance. It would also help citizens in developing countries better hold governments accountable for their use of tax revenues.

    Other countries are already taking action. The United States requires country by country reporting from all multinationals in the oil, gas and mining sectors. The European Union has voted to require country by country reporting from forestry, mining, oil and gas companies and from all European banks. Australia is starting to look increasingly isolated in not requiring the multinationals registered here to provide this level of transparency. This is something that would not only help Australia, but also help the developing countries in which Australian-registered multinationals do business.

    As Mark Zirnsak discussed last week, though, we have a new opportunity to take action to tackle tax evasion and improve transparency globally. The OECD (rich countries' club) has asked for member nations (including Australia) to provide concrete suggestions for an action plan to reform the global tax system. Talking tax will be high on the agenda for the G20 Finance Ministers' meeting when Treasurer Wayne Swan goes to Moscow in July. 

    You can read Micah Challenge's submission to Treasury regarding the taxation of multinationals here (pdf). As well as country-by-country reporting we are also asking for automatic exchange of tax information to become the global standard, and for better disclosure of the true owners or beneficiaries of companies, trusts and foundations.

    Please join our campaign calling on Treasurer Wayne Swan to help make the global tax system work for the poor when he talks tax with the OECD and the G20.