Rich countries' solutions to end tax dodging fall short | ActionAid UK

Steven Frost

Campaigns Team

As the OECD (Organisation for Economic Co-operation and Development) release their big plan to tackle international tax dodging, we take a look at what this means for women and children living in developing countries and ask the most important question: will it actually work? 

Campaigners in Zambia fight to make tax fair.
Campaigners in Zambia fight to make tax fair.

A plan to fix tax dodging

In 2013, following huge public outcry over tax dodging and lots of brilliant campaigning by people like you, the G8 group of world leaders committed to reform the international tax system. As a result the OECD (a club of rich countries) set in motion a process to look at how to tackle tax dodging.

This process, known as BEPS (which stands for Base Erosion and Profit-Shifting, and is basically a fancy way of saying tax avoidance), has just released a proposal on how to end tax dodging.

Will the OECD’s plan work?

Though some parts of the OECD’s new plans are a step in the right direction, they only address the tip of the iceberg. Here’s why: 

  • The plan was led by rich countries. That means developing countries like Zambia didn’t have a say, even though these new rules have a huge impact on them. As the rules weren’t made with them in mind, they won’t work for developing countries.
  • The recommendations miss a lot out. They don’t address a big problem with unfair international tax treaties: that they give rich countries the rights to a much bigger share of tax than developing ones. And they don’t take away the pressure for countries to compete for investment by offering lower and lower taxes.
  • The tax system is broken. Rather than changing the rules to fix this, the new plan just limits the damage.

Pamela Chisanga, country director for ActionAid Zambia, said: “These proposals would not have prevented many of the major tax avoidance scandals of the last few years, nor do they do enough to help developing countries find a sustainable route out of poverty,” 

All in all, the OECD’s recommendations are just a plaster on an already broken system. To really stem the tide of tax dodging, we need to do much more.

Read our report to find out more. [PDF]

Who does tax dodging affect? 

Tax pays for the essential public services that people need to climb out of poverty. When companies dodge their taxes, countries lose the money they need to pay for schools and hospitals. And when schools and hospitals are affected, it’s women and children who suffer the most.

Caroline Muchanga, a market stall trader in Zambia, told us how overstretched her local clinic is: ‘We spend so much time in the queues, sometimes even three hours.’ And how poor the service is: ‘You go to the hospital and and you find there is no medicine.’

Caroline Muchanga, 28, shows the tax receipt for her market stall

What can you do?

There’s still a lot of work to be done to make tax fair – ultimately we need a more democratic global system that gives every country a fair say.

We can’t let the OECD convince everyone that the problem of tax dodging is solved. We need you to help us challenge their arguments by spreading the word now on social media.

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Photos: Owen Miyanzi/Demotix/ActionAid