EU to Impose Tax on Multinationals Which Dodge Tax Burden in Developing World?

December 10th, 2009

Agence France-Presse is reporting that the European Union is considering imposing a tax on multinational corporations which shirk their tax responsibilities in developing countries while hiding their profits away in secrecy jurisdictions/tax havens.  From AFP:

EU Development Commissioner Karel De Gucht on Wednesday suggested a tax in Europe for multinationals operating in developing nations but squirrelling profits off to tax havens.

“We must take our responsibilities regarding multinationals based in Europe with activities in the developing world and not consider that financial transfer to tax havens have been duly taxed,” De Gucht told a good governance conference at the European parliament in Brussels.

Asked for details, he said that Europeans should find a system to allow them to raise considerable funds for development aid.

Currently tax evasions is “at least three times bigger than development aid,” he added.

Funds collected from such companies could be used as development aid.

Tax evasion is “a real development problem,” he said, before calling for tax reform in developing nations.

“Helping developing countries to strengthen their tax systems and to raise more tax revenues is not just a new theme or the new fashion in the development agenda. It is in fact an essential key to sustainable development and to enhance ownership of poverty reduction policies.”

This is a fascinating idea, and it’s great to see that the European Commission is focused on these issues.  My only concern is how do they know which companies are shirking their responsibilities?  Unless we introduce more transparency into the global financial system, it seems very difficult to know.

Regardless, Eva Joly, the chair of the EU Parliament Development Committee and an Advisory Board member of Global Financial Integrity, has shown a passion for these issues.  There is definitely reason to be hopeful.

Written by Clark Gascoigne

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