Tuesday, July 05, 2011

African countries to begin tax treaty discussions to help tackle big business tax dodging

From the ActionAid blog, by Martin Hearson

Tax justice campaigners are always pleased when companies find themselves in the headlines as a result of tax avoidance activities that we or others have uncovered. But it’s important to remember that the real purpose of our work is to achieve concrete reforms in support of tax justice for the poor in developing countries.

So it’s great news that African tax authorities have not only acknowledged the impact of ActionAid’s recent report highlighting tax avoidance by the global brewing company SABMiller, but also committed to doing something new in response to it. Meeting last week to discuss our report under the auspices of the African Tax Administration Forum (ATAF), several of the countries in which SABMiller operates agreed to work together to step up efforts to combat tax dodging by multinationals.

While there had been some suggestion ahead of the meeting that an unprecedented joint investigation of SABMiller might be initiated, it now looks like individual countries that wish to investigate the company’s tax practices will have to do so at national level. SABMiller, having been notified of the outcome of the meeting, told journalists
“Regardless of the scope or geography of any investigation, we believe our tax practices are entirely appropriate and comply with recommended guidelines.”
ActionAid understands that a joint investigation cannot take place because the requirement for taxpayer confidentiality prevents tax authorities from discussing multinational taxpayers with each other, except where they have a tax treaty that permits it. While the countries involved have various bilateral tax treaties with each other, a group investigation would require a multilateral treaty, which they don’t have.

So the most exciting outcome of the meeting, reported by the Wall Street Journal, is that
“Tanzania, Zambia and South Africa are working to establish a cross-border agreement that would enable revenue authorities to share information about specific taxpayers, the first inroads into an effort by countries across the continent to clamp down on tax avoidance.”
Tax justice campaigners, including ActionAid, have been calling for multilateral tax information exchange for some time, and support for such moves is a part of the G20’s tax and development agenda.

We’ll be watching the G20 this year and we hope they’ll support developing countries by signing up to a multilateral deal themselves, and bringing pressure to bear on tax havens to do the same.

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