Financial Transparency Coalition

LONDON – Christian Aid today welcomed a House of Commons committee’s report on tax dodging by multinationals, which puts morality at the heart of the tax debate, and said the harm the practice causes to developing countries should be seen in the same light.

Parliamentary spending watchdog the Public Accounts Committee highlighted how multinationals minimised corporation tax on the profits made in the UK by exploiting national and international tax structures.

The committee said the evidence it heard from multinationals and HM Revenue & Customs about how successful companies ‘with huge operations’ in the UK could pay so little tax ‘was unconvincing, and in some cases evasive.’

Calling for reforms in the way multinationals are allowed to order their finances to minimise tax, the committee said: ‘there is a moral case on top of the basic economic case that taxation of economic activity should transparently reflect where that activity occurs.’

Christian Aid’s senior economic justice adviser Joseph Stead said today:‘The report drew welcome attention to the impact of tax dodging by multinationals in the UK, where the picture is bad enough. It is, however, a great deal worse in developing countries.

‘Christian Aid estimates that tax dodging by multinationals and other businesses trading across borders in poorer countries which lack the expertise and revenue capacity to fight back costs the exchequers of those countries around US$160bn a year, nearly one and half times what they receive in aid.

‘In recent years the opportunities for companies to be legally compliant while contravening the spirit of the law have proliferated. We are extremely pleased that the committee has agreed that such behaviour, while it might be legal, contravenes the spirit of the law, is immoral and needs to be countered.’

The report, Mr Stead added, came only weeks after the House of Commons International Development Committee called on the UK to lead the global fight against tax dodging by multinationals in the developing world.

That committee highlighted effective tax collection as vital in helping poor countries escape aid dependency and poverty, and said requiring multinationals to report their accounts on a country-by-country basis would make it easier to spot anomalies.

At present multinationals can hide their activities in particular jurisdictions as they are only required to submit consolidated global accounts, not individual accounts for their subsidiaries.

Mr Stead said: ‘Chair of the Public Accounts Committee Margaret Hodge called today for multinationals to report their tax practices transparently, and pay an appropriate amount where they make their profits to reflect those profits.  The way to make that happen is to introduce country by country reporting.

‘In responding last month to the International Development Committee’s report, the Government ignored that key recommendation. We urge it now to abandon that stance.

‘The Prime Minister has said that the G8 will address tax and transparency, with these two committees showing how important this is for developed and developing countries alike.

‘The G8 needs to fight the secrecy inherent tax havens, which allows tax-dodging multinationals to hide profits away from public scrutiny. We urge the UK to use its influence when chairing the G8 next year to reform the rules that allow tax havens to facilitate tax dodging on a vast scale.’

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Notes to Editors:

1. Christian Aid works in some of the world’s poorest communities in around some 50 countries at any one time. We act where there is great need, regardless of religion, helping people to live a full life, free from poverty. We provide urgent, practical and effective assistance in tackling the root causes of poverty as well as its effects.
2. Christian Aid has a vision, an end to global poverty, and we believe that vision can become a reality. We believe that the underlying causes of poverty were made by, and can be ended by, human action. Our strategy for building the power of us all to end poverty is embodied in a new report ‘Partnership for Change’: http://www.christianaid.org.uk/Images/2012_strategy.pdf
3. Christian Aid is a member of the ACT Alliance, a global coalition of 125 churches and church-related organisations that work together in humanitarian assistance, advocacy and development.  Further details at http://actalliance.org
4. Follow Christian Aid’s newswire on Twitter: http://twitter.com/caid_newswire
5. For more information about the work of Christian Aid visit http://www.christianaid.org.uk