6 reasons why tax dodging matters for people living in poverty | ActionAid UK

Tax can often seem complicated and not directly relevant to our lives, or to the lives of people who live every day in poverty. But it is. Tackling tax dodging offers a path out of poverty for billions of people.

So, why do we care so much about tax dodging?

Frackson Phiri, Deputy Head of Isoko Primary School in Zambia. The school doesn't get enough money from the government to pay for desks for the pupils.
Frackson Phiri, Deputy Head of Isoko Primary School in Zambia. The school doesn't get enough money from the government to pay for desks for the pupils.

1. Poor countries lose a lot of money to tax dodging

Every year the world’s poorer countries lose an estimated $160 billion to corporate tax dodging. Yes. That’s right. $160 billion. 

To put that in context, that means that they are losing more money to corporate tax dodging than they receive in all international aid from all rich countries put together. That’s a lot of money.

2. That tax should be paying for public services that help reduce poverty, like education

Across the world’s poorer countries, governments don’t have enough money to pay for basic public services that are crucial to tackling poverty, like ensuring every child has a good education.

Last year, I met Ivor Mwena, Head Teacher of Isoko Primary School in northern Zambia, who told me what tax meant to him:

“Our school building was too small to accommodate all our students, which means we were only able to offer two hours of teaching to each class a day. With ActionAid’s support the local community constructed a new school building themselves.

 Ivor Mwena, Head Teacher of Isoko Primary School, northern Zambia

“With the extra classrooms, each student will now get twice as much teaching time. However, we still can’t afford desks for the new classrooms, meaning the students have to sit on the concrete floor.

“If the government had more tax revenue they could fund constructing classrooms to house more pupils and pay for the desks in the new building.”

3. It’s simply not fair for big companies not to pay tax

Marta works in a small beer and food stall in Ghana, working over 12 hours a day every day to make just over £200 a month in income. 

Next door to her stall is the Accra Brewery, owned by SABMiller which make beers like Grolsch and Peroni, which produces nearly £30 million of beer a year.

Marta, a small shop owner in Ghana, pays more tax than the giant brewery next door

Astonishingly, because the multinational company uses tax havens and complicated accounting to cut its tax bills, Marta pays more tax than the giant brewery next door.

Marta sums it up pretty well: “Wow. I don’t believe it.”

4. Tax is sustainable and supports democracy

It’s not just about the amount of money, as my colleague Kryticous, who works on tax for ActionAid Zambia, explains:

Kryticous Nshindano, Economic Justice Manager, ActionAid Zambia

“Ultimately, tax is the only way we’re going to eradicate poverty. Tax is the most sustainable source of finance for public spending and it gives you freedom in how you target spending on development, so you can achieve what you want to achieve as a nation.”

5. The UK’s tax system is responsible for a lot of these problems

The UK’s tax system has a big impact on how much tax is paid by UK-run multinational companies when they operate in poorer countries.

We’ve estimated that tax dodging by UK multinationals could be costing poorer countries as much as £3 billion every year. That’s enough money to give half the children in the world who currently don’t go to primary school an education.

6. We can do something about it!

The good news is that it doesn’t have to be this way. Ahead of the election in May we have a real opportunity to influence the priorities of the future government, to make sure that UK companies pay their fair share of tax in some of the world’s poorest countries.

We are calling on all political parties to pledge to introduce a Tax Dodging Bill which would raise billions to tackle poverty in developing countries, as well as raising billions to tackle poverty in our society. But we need your help to make it happen.