Tuesday, November 30, 2010

Richard Brooks: more on African tax losses

Richard Brooks, the lead investigator on ActionAid's excellent recent investigation into the tax affairs of brewer SABMiller, has a very fine piece in The Guardian, reflecting on what he has discovered.

We urge you to read the article in full, for it contains many important points. One that we'd like to draw out now, however, is this, concerning double tax agreements:
"Ghana recently signed one such agreement with Switzerland as a very expensive price for Swiss agreement to divulge details of money stashed by wealthy Ghanaians in Swiss bank accounts."
Now, having read that, take a look at this, on India:
"Switzerland managed to wrest various important concessions in the revised DTA -- above all, a most-favoured-nation clause regarding the fiscal treatment of interest, dividends, licences, etc. for Swiss investments in India.These are, of course, far less welcome."
The details are here. There is clearly a pattern: a Swiss strategy to screw more concessions out of developing countries on tax treaties - in exchange for miniscule progress on information exchange. More generally, Brooks explains:

"The rules of the international tax game are set by the developed economies' club, the Organisation for Economic Co-operation and Development, and are forced on developing countries through "double taxation agreements" they must sign if they are to have any hope of attracting foreign investment. These treaties largely transfer the rights to tax the royalties and fees from the country where they are paid to the one where they're received even when, as with Switzerland and the Netherlands, that country has no interest in taxing them."

It is just this sort of power relationship that we are now trying to address.


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