Tuesday, March 06, 2012

Collateral Damage: How UK government tax breaks for MNCs will harm poorer countries

Our friends at Action Aid in London have just released the following press release concerning current UK government plans to significantly relax rules on corporate taxation, which would be hugely detrimental to the tax regimes of developing countries:

Ahead of the most important austerity budget in a generation, the government plans to open up a huge new tax loophole that will cost ordinary people around the world billions warns ActionAid in a new report ‘Collateral Damage’. The international development charity has revealed that this loophole will allow UK based multinationals to avoid an estimated £4 billion worth of taxes in developing countries and will also cost the UK Treasury £1 billion.

Until now, the UK’s anti-tax haven rules have provided a deterrent to companies seeking to avoid paying taxes in Britain and poor countries alike. The proposed changes will make it easier and more lucrative for UK companies to dodge tax in developing countries.

Martin Hearson, Campaign Manager at ActionAid said: “If the government waters down these rules in the March budget it could inflict huge collateral damage on poor countries like Zambia, Ghana and Tanzania who desperately need that money to fund doctors, nurses and teachers and to ultimately help lift them out of poverty. And with a cost to the UK of £1billlion - everyone loses out.”

A recent UK opinion poll commissioned from YouGov by ActionAid also shows strong demand for tougher government action on corporate tax avoidance with 79% saying the government isn’t doing enough to tackle tax avoidance.

The results revealed widespread support across the political spectrum and in all regions.

· 74% of Conservative voters, 83% of Labour voters and 87% of Liberal Democrat voters said the government should be doing more tackle tax avoidance.

· 72% said that companies that use legal loopholes to avoid their tax bills in the UK or developing countries were behaving irresponsibly.

Martin Hearson continued: “The British public wants the government to do much more to prevent endemic corporate tax avoidance. Why should ordinary people around the world continue to pay the price of tax dodging by UK companies? This new loophole could cost the poorest countries as much as £4 billion a year. It’s time for the government to urgently rethink its plans.”

ActionAid is calling on the Government to make a full assessment of the changes’ impact on developing countries, and to take steps to mitigate any harm, before they become law. In November last year, the IMF, OECD, UN and World Bank called on G-20 countries to undertake such “spillover analyses” when they make big changes to their tax laws.


For more information and interview bids please contact Asha Tharoor in the press office on 020 3122 0614 or asha.tharoor@actionaid.org


1. Link to ActionAid’s media brief: Collateral Damage

2. Methodology:

- £1 billion is the UK Treasury’s own figure.

- £4 billion is an ActionAid estimate, the methodology for which is detailed in ‘Collateral damage’.

3. YouGov’s full poll results as commissioned by ActionAid http://www.actionaid.org.uk/doc_lib/yougov_results.pdf

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,764 adults. Fieldwork was undertaken from 19th - 20th February 2012. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

4. The IMF, OECD, UN and World Bank recommendation, made in the report ‘Supporting the development of effective tax systems’, is: “It would be appropriate for G-20 countries to undertake “spillover analyses” of any proposed changes to their tax systems that may have a significant impact on the fiscal circumstances of developing countries…they may point to remedial measures to be incorporated into the reform and should be published.” (http://www.oecd.org/dataoecd/54/29/48993634.pdf)

5. ActionAid’s report Addicted to Tax Havens: The Secret Life of the FTSE 100 www.actionaid.org.uk/doc_lib/addicted_to_tax_havens.pdf


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