The G20 finance ministers’ meeting this weekend is the last chance to deliver its commitment to help developing countries benefit from the tax evasion crackdown, international development charity ActionAid warns.
Gordon Brown personally intervened at the London summit in April this year to ensure that the communiqué committed G20 countries to finding a way for developing countries to benefit from the tax haven crackdown by the end of 2009. Brown also wrote to the UK’s crown dependencies and overseas territories after the summit, urging them to enter into more tax information sharing agreements.
If the G20 fulfils its promise, it will enable developing countries to combat tax evasion by multinational corporations who operate within their territories and allow them to significantly boost spending on essential health and education services and jobs.
But ActionAid says the current model pursued by the G20 appears to neglect developing countries, and is calling for a new multilateral deal on automatic tax information exchange.
Many poorer nations including Bangladesh, Ethiopia and Nepal collect less than 10% of their national income in taxation, compared to 37% in the UK. ActionAid has calculated that if all countries had raised just 15% in tax in 2007, nearly £100 billion in new resources would have become available for developing nations to help combat poverty. This amount could put an end to world hunger six times over or provide a school place for all children twelve times over.
Yet most adults in the UK are unaware of the scale of illegal tax evasion committed by multinational companies operating in poorer countries. In a recent YouGov survey commissioned by ActionAid, more than three out of four people (79%) said that they had been unaware that developing countries lose more money as a result of multinational companies illegally evading tax than they receive in aid.
Once they were given this information, nearly two-thirds (65%) agreed that the UK government should help developing countries acquire the tools to prevent both tax evasion and avoidance by multinational companies. More than three quarters (79%) said it was important for the government to push for stringent new international rules at the next G20 international meeting to prevent corporate tax evasion and avoidance. ActionAid’s tax expert, Martin Hearson, who will be at Saturday’s summit in St Andrews, said: “Developing countries lose more to tax evasion than they gain in aid. This denies governments the resources they need to provide basic services like schools and hospitals.
“Saturday’s summit will be the litmus test of the G20’s commitment to involve developing countries in its tax havens crackdown. Nothing less than a truly multilateral, global deal will do.
“Without it, we continue with the status quo of a two-tier system in which countries with the economic power to impose sanctions can target tax haven abuse, whilst poor countries – which suffer most from tax evasion – are left out in the cold.”