1 February 2016
Malawi is the poorest country in the world. And thanks to an unfair tax agreement, signed with the UK over half a century ago, British companies who work there can get away with paying hardly any tax in the country. That means essential public services like schools and hospitals are starved of funds, so that Malawi’s poorest women and girls pay the price for this tax dodging.
It’s time for that to change.
UK tax dodging is just the tip of the iceberg
Tax dodging costs the UK billions. The news that Google’s could be paying as little as 3% tax is the latest in a long line of familiar tax scandals to hit UK news. But this is just the tip of the iceberg; did you know that developing countries lose an estimated $200 billion a year to corporate tax dodging? That’s more than these countries receive in foreign aid.
Shining a light on unfair tax treaties
A major way big companies lower their tax bill in the world’s poorest places is by taking advantage of unfair tax treaties. These treaties are agreements between countries that divide up where companies should pay tax.
That might sound harmless – but in reality, poorer countries almost always lose out. These treaties often mean companies don’t pay their fair share of tax, and women and girls living in poverty pay the price as key public services like schools and hospitals are starved of funding.
Why is the UK-Malawi tax treaty so bad?
- The UK is the third biggest investor in Malawi. If UK companies were paying their fair share, that money could pay for a lot of poverty-fighting public services.
- The treaty was signed by the colonial governor in 1955 on behalf of Nyasaland, South Rhodesia and North Rhodesia – countries that don’t even exist anymore. So it’s unfair and outdated.
- The treaty repeatedly bans Malawi from taxing money UK companies take out of the country. Money that Malawi's public services desperately need.
It’s time for the treaty to change – if you agree you can sign our petition.
Tax dodging hurts Malawi’s schools
Meet Stella Machinjiri (above) who teaches at M’bwetu Primary School. She is one of just 12 qualified teachers responsible for 1,704 pupils - that's over 140 children per teacher. Stella told us it is ‘very difficult’ to teach a class of this size. The school doesn’t have enough buildings, so children have to learn outside in the blazing sun, fighting to get a place under the shade of one tree.
When we spoke to Stella, she said:
“Education is important for Malawi as education is the key to everything. The future for the children here would be brighter if we had enough teachers, learning materials and classrooms for the pupils. It is very hard to hear that there are big companies that come to Malawi and don’t pay their taxes. I wish they could have been paying their taxes to Malawi because had it been that they were paying I think we wouldn’t have faced these problems.”
“I pay almost 17,000 kwacha (just under £17) in tax every month and then when I go to the shops and I buy a packet of sugar or a tablet of soap I have to pay VAT. Big companies have to start paying as well.”
Does Malawi want a new treaty?
Tax activists from ActionAid Malawi and other organisations are also calling for the Malawian Finance Minister to make the treaty fair. We in the UK can make their voices louder and stronger, by making the same demand to our own government.
What can you do?
David Gauke, the minister responsible for tax, can take the UK back to the negotiating table, and offer to finally make this ancient treaty fair. Tell the UK Government that you’re standing with activists in Malawi to make tax fair – and that they should too: