If companies pay more tax in Africa, wouldn't it be lost to corruption?
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.
Is tax dodging illegal?
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.
Why is tax justice important?
Tax dodging by multinationals has become big news, but it's not just the UK that's losing out. 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.
How can the UK Government stop tax dodging?
David Cameron announced that growth, tax and transparency are his main priorities when he chairs the G8 Summit in June. On tax, he specifically said that developing countries should see benefits.
The G8 will focus on the problems surrounding tax haven secrecy – that facilitates tax dodging, alongside money laundering and corruption. We need the UK to push hard for a new international agreement to end tax haven secrecy – and soon.
But there’s also lots that government could do on its own to tackle tax dodging. In the budget, it could make big companies spill the beans about tax avoidance in poor countries. It should also do much more to help poor countries improve their own tax systems.
What are we asking multinational companies to do?
Multinational companies must act with much more responsibility and stop exploiting loopholes to lower their tax bills in developing counties.
As a first step they should incorporate tax justice into their corporate responsibility programme, and make their tax affairs more transparent by publishing a basic set of accounts in every country they work in – including tax havens.
Why are we focusing on the Associated British Foods group?
This is a much broader problem than just one company, but we have clear evidence that Associated British Foods has been depriving Zambia of millions in tax revenues, which needs to be brought to the attention of the public and policy makers. We think that Associated British Foods should pay a fair share of tax in Zambia, but more importantly, government should change the international rules that make corporation tax an optionalextra for many multinationals.
ActionAid has been calling on both companies and governments to pay a fair share of tax in developing countries since 2008. David Cameron says it’s time for multinationals to “wake up and smell the coffee” on tax avoidance. We want a landmark global treaty that puts tax havens out of business and David Cameron has an amazing opportunity to do this as leader of the G8 at their summit in June in the UK.
Doesn’t Associated British Foods/ Zambia Sugar make a huge contribution to the Zambia economy?
Businesses have a huge role to play in developing countries like Zambia and providing jobs is very important. But this contribution is undermined when they don’t pay their fair share of tax. Zambia Sugar has generated profits of $123 million since 2007 and they should pay tax on this. It can’t be right that in some years, the cane cutters on the plantation have been paying more tax than the company.
