If G20 nations were hit as hard by corporate tax dodging as Africa, they'd have a $1.2 trillion hole in their budgets. African nations are losing nearly 2 per cent of their gross domestic product (GDP) as a result of companies fiddling the books through 'trade mispricing', according to figures released today by Oxfam. This huge tax loss is equivalent to more than half the amount that governments spend on health in Sub Saharan Africa.
Oxfam calculated that if G20 countries lost the same proportion of their GDP to corporate tax dodging it would blow a massive $1.2 trillion (£770bn) hole in G20 budgets. And if the UK government were to lose the same it would create a whopping $41.5bn (£26.6bn) gap in the country's budget.
The international agency is calling on world leaders, meeting at the G20 Summit in St Petersburg later this week, to take urgent and concrete action to fix a broken tax system that allows companies to suck billions of dollars out of Africa. Trade mispricing is a way of moving money around to avoid paying tax where a company is really doing business, and this tax dodging tactic alone is depriving African countries of $38.4 billion (£24.4) every year, money which could be spent on tackling poverty and boosting their economies.
In July, G20 finance ministers endorsed a plan to clamp down on base erosion and profit shifting (BEPS) by multinational corporations, and the G20 should endorse this plan as well as ensuring that the poorest countries - those particularly affected by corporate tax avoidance - are invited to the negotiating table.
Emma Seery, Oxfam's Head of Development Finance and Public Services, said: "The G20 should be ashamed to be at the helm of an economic system that allows companies to rip off Africa to this extent.
"The G20 would never allow companies to fiddle them out of a trillion dollars. It is an outrage that the poorest countries not only suffer this, but are not even invited to the table to take part in tax talks."
The success of the BEPS process relies on a serious solution to the tax rules that allow companies to shift profits around, and avoid paying tax based on where they truly make their profits. Oxfam is calling on the G20 leaders to mandate finance ministers to work with the IMF and OECD to bring a clear solution to the table for agreement at next year's G20 in Australia.
The UK government put tax at the top of the agenda for the G8, which signalled a warning to companies that their days of ripping off rich and poor countries alike are numbered. But much more is needed to ensure that tax dodging no longer undermines the fight against global poverty.
G20 countries control more than 80 percent of the global economy. Oxfam is calling on them to go beyond an agreement on BEPS and finish the job on transparency and tax secrecy by:
- supporting an automatic system for the exchange of tax information that will allow rich and poor countries alike to access tax information.
- agreeing to put an end to phantom firms by making sure company ownership can no longer be a secret and implementing public registries of beneficial ownership.
- agreeing to country by country reporting for all multinational companies so that they have to be transparent about where they are paying their taxes.
Emma Seery said: "A responsible G20 would be doing much more to tear down the walls of secrecy that allow companies to dodge their tax obligations. If G20 leaders are serious about making sure companies pay their way, this summit will agree to a deadline to end tax secrecy for corporate giants and phantom firms." (
http://www.oxfam.org.uk/blogs/2013/09/g20-must-rewrite-tax-rules-and-recoup-africas-missing-billions)
Posted by Sarah Dransfield
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