Corporate tax loophole costs poor countries £4 billion | ActionAid UK

Corporate tax loophole costs poor countries £4 billion

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Katherine Mwape, ZambiaOur new report Collateral Damage warns that the government is planning to open up a huge new tax loophole that will cost ordinary people around the world billions, just ahead of the most important austerity budget in a generation.

The report reveals that this loophole will allow UK based multinationals to avoid an estimated £4 billion worth of taxes in developing countries and will also cost the UK Treasury £1 billion.

Until now, the UK’s anti-tax haven rules have provided a deterrent to companies seeking to avoid paying taxes in Britain and poor countries alike. The proposed changes will make it easier and more lucrative for UK companies to dodge tax in developing countries. 

Martin Hearson, Campaign Manager at ActionAid said: “If the government waters down these rules in the March budget it could inflict huge collateral damage on poor countries like Zambia, Ghana and Tanzania who desperately need that money to fund doctors, nurses and teachers and to ultimately help lift them out of poverty. And with a cost to the UK of £1billlion — everyone loses out.”

A recent UK opinion poll that we commissioned from YouGov also shows strong demand for tougher government action on corporate tax avoidance with 79% saying the government isn’t doing enough to tackle tax avoidance.

The results of the poll revealed widespread support across the political spectrum and in all region.

>> 74% of Conservative voters, 83% of Labour voters and 87% of Liberal Democrat voters said the government should be doing more tackle tax avoidance

>> 72% said that companies that use legal loopholes to avoid their tax bills in the UK or developing countries were behaving irresponsibly

Martin Hearson continued: “The British public wants the government to do much more to prevent endemic corporate tax avoidance.  Why should ordinary people around the world continue to pay the price of tax dodging by UK companies? This new loophole could cost the poorest countries as much as £4 billion a year. It’s time for the government to urgently rethink its plans.”

We are calling on the Government to make a full assessment of the changes’ impact on developing countries, and to take steps to mitigate any harm, before they become law. In November last year, the IMF, OECD, UN and World Bank called on G-20 countries to undertake such “spillover analyses” when they make big changes to their tax laws.