Five steps the UK Government should take to end tax scandals - Oxfam


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Image by Eric Truong


Oxfam’s new briefing paper, Ending the Tax Scandals, sets out five policy measures needed to help ensure that both rich and poor countries can claim their fair share of revenue. This is money that is needed to fight poverty and to help fund essential public services such as hospitals and schools.

The paper urges the UK Government to prioritise ending tax secrecy as a starting point to tackling tax avoidance by companies and wealthy individuals and also examines the barriers that have been holding back vital reform.

Katy Chakrabortty, Oxfam’s Head of Advocacy, said: “We’ve seen governments respond to tax scandals like the Paradise Papers before but not with the decisive action needed to make a real dent in the problem, let alone put an end to tax dodging once and for all.

“Reforming tax rules isn’t easy but it is possible, and the Government has previously said it is willing to lead on this issue. Any reasons for delay are completely outweighed by the compelling moral and practical case for action.

“Tax avoidance continues to deprive developing countries of billions that could be invested in healthcare, schools and fighting poverty as well as hurt ordinary taxpayers in rich countries like the UK. Millions of the world's poorest people are missing out on essential services that could save their lives and help them escape hardship.

“The Government should urgently drive forward tough action to tackle tax dodging, starting by making sure UK-based multinationals publish their tax payments in every country, and requiring UK-linked tax havens such as Bermuda to reveal the real owners of companies.”

Thousands of people across the UK have signed a petition calling on the Chancellor to act to end tax secrecy after Oxfam last week launched a hard-hitting film - ‘The Heist that No One is Talking About’ - illustrating the human cost of tax avoidance on the world's poorest.

Oxfam is urging the UK Government to:


    1. Use the Budget to commit to introduce public country-by-country reporting for all multinational companies operating in the UK. One in five of the world’s biggest companies would be covered by this legislation, Oxfam has calculated. The Government supported and passed an amendment to the 2016 Finance Bill giving it the power to implement these tougher transparency requirements – yet more than a year later it is still no closer to being a reality.

    2. Ensure the UK’s overseas territories and crown dependencies introduce public registers of company beneficial ownership. Appleby, the firm at the heart of the Paradise Papers scandal, is based in Bermuda and has offices in two other UK-linked tax havens, the British Virgin Islands and Cayman Islands - and all three crown dependencies. No overseas territory or crown dependency has complied with the Government’s request to publicly reveal the identities of company owners. Private registers are not an adequate substitute as they would not be open to full scrutiny, especially by authorities in poor countries.

    3. Give developing countries access to tax and company data. In efforts to bring global tax dodgers to book, tax officials in many countries share information. Yet poor countries are frequently excluded from these arrangements – for example, none of the world’s poorest 31 nations is part of the OECD’s Common Reporting Standard. The Government has said it is committed to ensuring developing countries can benefit from automatic information exchanges – now it’s time to make this happen.

    4. Ensure that UK corporate tax rules do not incentivise companies to avoid tax in developing countries. An independent analysis is needed to ensure UK corporate tax rules do not have harmful knock-on effects on the ability of developing countries to collect taxes. Tax treaties should align with the objectives of UK development assistance, to reduce poverty and increase revenue collection in poor countries.

    5. Show international leadership on tackling tax avoidance. This means pushing for a new generation of global tax reforms that include all countries and overcome flaws in current initiatives such as the BEPS (Base Erosion and Profit Shifting) project.

     

     

     


Increasing corporate transparency is vital to allow countries to verify whether companies' tax bills are in line with their real economic activity in every country where they do business – and to hold them to account if not. In poorer countries, a much greater proportion of the overall tax take comes from corporate taxes, the International Monetary Fund has found.

While governments make political choices about spending, there is evidence to show that when developing countries increase their tax revenue – in particular from corporate and income tax – they spend more on healthcare, leading to healthier populations. Even small increases in health spending can be significant. Public health researchers estimate that spending just $5 extra per person annually in 74 countries with large numbers of people living in poverty could prevent, on average, the needless deaths of eight million mothers, babies and children a year.

Oxfam campaigns for more accountability about how tax revenue is spent and for more investment to tackle shortfalls in vital public services in 40 poor countries around the world.

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The briefing paper, Ending the Tax ScandalsFive Actions the UK Government Can Take to Tackle Tax Avoidance, is available online.

Notes 

Oxfam’s new film, The Heist That No One is Talking Aboutmade by Don’t Panic,  YouTube.

The UN estimates that corporate tax avoidance costs developing countries at least $100bn a year. Economist Gabriel Zucman estimates that the world’s poorest regions lose $71bn annually to offshore tax avoidance by wealthy individuals. 

The Flint Amendment to the Finance Bill was accepted on 5 September 2016 and empowered ministers to require large multinationals with a headquarters or substantial presence in the UK to publish headline information about their income, employment and taxes. The UK Government has been waiting for a corresponding EU-wide deal on public country by country reporting to progress - but this has been held up and it's unclear if EU leaders would approve it.

The IMF says that corporate income tax contributes around 16 percent of government revenue in poor countries compared to around 8 percent in rich countries. While corporate income tax rates have fallen in recent years, developing countries are likely to still depend on it roughly twice as much. 

How tax collection affects health spendingFinancing universal health coverage - effects of alternative tax structures on public health systems: cross-national modelling in 89 low-income and middle-income countries

Advancing social and economic development by investing in women's and children's health: a new Global Investment Framework draws on the work of a group coordinated by the WHO and The Partnership for Maternal, Newborn & Child Health. The authors estimate that 147m child deaths, 32m stillbirths and 5m maternal deaths could be avoided if health expenditures increased by US$5 per capita per year between 2013 and 2035. Oxfam's figures are annual averages based on the aggregate numbers: 7.78m child deaths and 217,000 maternal deaths annually. The report examines 74 countries with large numbers of people living in poverty which experience 95 percent of global maternal and child mortality, such as India and Zambia. 

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