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Christian Aid urges G20 to crack down on tax dodging pinstripe 'pirates'

Pinstripe ‘pirates’ strutted their stuff aboard the Golden Hinde at Southwark today (3 Sept) to highlight Christian Aid’s tax justice campaign.

Pinstriped piratesThe charity is urging G20 finance ministers to prioritise reforms that would help developing countries counter the tax dodging activities of international companies.

It calls on Chancellor of the Exchequer, Alastair Darling, to take a lead in championing the interests of poor countries.

Missing billions

Christian Aid says that every year the developing world is cheated out of as much as $160bn in revenue by companies disguising their profits –often by using tax havens - to lower their tax liability.

The charity wants new rules that would force tax havens to reveal automatically the identities of businesses and individuals holding funds offshore, and provide details of the amounts involved.

It also wants companies and corporations to be forced to disclose the profits they make, and the taxes they pay, in every country where they operate.

‘Reform is vital’

The finance ministers are this week (3-4 September) due to discuss a new report from the Organisation for Economic Co-Operation and Development (OECD) on progress being made towards improving standards of tax transparency.

Dr David McNair, senior economic justice adviser at Christian Aid said: ‘In the past we have been dismayed at the OECD’s lack of ambition, and we don’t expect any major breakthrough. The OECD is tasked with providing technical advice to the G20. All too often, however, it simply reflects the interests of the world’s wealthiest nations.

‘In a communiqué earlier this year G20 countries committed themselves to proposing measures to counter tax evasion that would benefit everyone, not just rich countries.

‘As the host of this meeting Alastair Darling is in a unique position to lead his counterparts in delivering on the undertaking that they gave.

‘Reform is vital. The revenues lost to developing countries at present could, if used according to current spending patterns, save the lives of 350,000 children under the age of five each year.’

‘Christian Aid says that unscrupulous businesses are able to remove vast sums from developing countries through the use of a number of illicit practices known collectively as ‘trade mispricing’. 1

The OECD’s proposals to the G20 to counter tax dodging centre on the use of bilateral instruments called Tax Information Exchange Agreements (TIEAs). The OECD announced earlier this year that tax havens would find themselves on a blacklist unless they sign such agreements with a minimum of 12 countries.

‘TIEAs are not the way forward, ‘said Dr David McNair. ‘They are extraordinarily bureaucratic and riddled with get-out clauses. The burden of proof countries must provide when requesting information is so high that they can seldom provide it.

‘Its only rich countries that have enough tax officials and other resources to even try. And its only rich countries that have the leverage to force tax havens to sign up to TIEAs.

‘The OECD is seeking to broaden the scope of TIEAs by making them multilateral. It fails, however, to address their sheer unworkability.  A new multilateral agreement on tax information sharing is needed in which information must be exchanged automatically, to ensure that developing countries benefit.'

Dr McNair said that the UK’s recent tax deal with Liechtenstein was tacit acknowledgement that TIEAs alone were insufficient to counter tax dodging. For as well as signing a TIEA with the tax haven, the UK needed a second agreement to ensure that UK taxpayers with accounts in Liechtenstein pay the right amount of tax.

For more press information, pictures or case studies, please contact Andrew Hogg on 0207 583 2058 or 07872 350534

Notes to Editors:

1. Trade mispricing includes subsidiaries of multinational corporations based in one country charging vastly inflated prices for goods and services to subsidiaries of the same corporations based in other countries, allowing those making the payments to move large sums offshore. This is known in the industry as ‘abusive transfer pricing’.

Unrelated companies can make secret deals with each other for exactly the same reason. Goods and commodities are exported at knockdown prices from the countries where they are produced to depress profits artificially and dodge tax. The company buying then sells them on at their true market value and splits the difference between the artificial and true price with the original seller.
A further scam involves goods from the industrialised world being sold to developing companies at hugely inflated prices to enable the company that is ‘the buyer’ to shift large amounts of capital abroad while reducing its profit margin and minimising its tax liability.

2. Christian Aid works in some of the world's poorest communities in nearly 50 countries. We act where the need is greatest, regardless of religion, helping people build the life they deserve.