1. Why is the government opening a new tax loophole?
2. If companies pay more tax in Africa, wouldn't it be lost to corruption?
3. Is tax dodging illegal?
4. Why are we singling out SABMiller?

5. Why is tax justice important?
6. How will this new UK tax loophole make it easier for multinationals to dodge their taxes?
7. How do you know that the UK could lose £1 billion and developing countries £4 billion?

Multinationals have been lobbying hard to water down anti-tax haven rules for some time. The Treasury has accepted their demands because it hopes the multinationals that have moved their headquarters to tax havens like Ireland will move back to the UK.

The government doesn't have to offer these concessions in order to attract business, because tax is only one of a number of factors that determine where a company locates. In fact, corporate tax is rarely the deciding factor when a company decides where to locate its real headquarters where there are hundreds or thousands of high-quality jobs. Instead, all that is likely to be attracted by these reforms is a skeleton outfit just big enough to qualify for UK registration.

Many African countries such as Ghana or Rwanda have already proven they can effectively invest government tax revenues in tackling poverty. But corruption is indeed a problem. ActionAid does lots of work in developing countries to monitor government spending – all the way from the national budget, to the local village. In this way, the people in a country hold the government accountable and corruption is gradually reduced. In the long term, increasing the tax revenues will only help to make governments more accountable to their people.

Read more about the Controlled Foreign Currency tax loophole

Tax avoidance activities are designed to comply with the letter of the law, not to break it. Many multinationals employ hoards of expensive lawyers and accountants to find these loopholes in the law. However, it’s not the same as tax evasion, which is illegal.

We’ve found evidence that SABMiller avoids its taxes in Africa and India. This is an extremely profitable company, based in the UK, which has massive operations in developing countries. It’s the biggest brewer in both Africa and China, second biggest in India, and has 94% of the beer market across six Latin American countries.

Chief Executive Graham Mackay has said that, “If there were any more of Africa, we'd be investing in it.” The company has a very active corporate social responsibility programme, but its use of tax havens really undermines these efforts. We want to turn it into a market leader for tax justice.

Tax dodging by multinationals has become big news, both in the UK and in poor countries. Developing countries lose more to tax dodging by multinational companies than they receive in aid each year. That’s money which is urgently needed to pay for essential public services, like teachers, doctors, roads and sanitation.

When companies pay less tax, ordinary people either end up paying more, or public services get cut. It’s high time that companies cleaned up their act and governments got on with closing the international loopholes.

Current anti-tax haven (or Controlled Foreign Company) rules work by deterring companies from exploiting the low tax rates offered by tax havens. If a multinational shifts its profits into a tax haven in order to lower its bills anywhere in the world, the UK tops up its tax bill, bringing it into line with the UK rate.

While the rules aren’t perfect, and don’t stop all tax dodging, they cover all UK companies and work if a multinational is trying to avoid its tax in the UK, or in developing countries. The changes the Treasury are proposing mean that the rules will only apply if the tax dodge is costing the UK. They will no longer apply when British companies try and dodge their taxes in developing countries.

The Treasury itself has estimated that the changes to anti tax haven rules could cost the UK £1 billion.

Based on the current economic activity of UK multinationals in the developing world and the additional profit shifting into tax havens likely to result from the Treasury’s proposals ActionAid estimates that developing countries could lose £4 billion each year. We’ve been calling on the Treasury to do a full assessment and estimate how much the impact will be on developing countries – which so far they’ve refused to do.

Find out more about this new tax loophole