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6/9/15

Multi-National Tax Dodging: End transnationals' $212 billion tax dodge on poorest countries - by Toby Quantrill

New estimates, from International Monetary Fund researchers, suggest that developing countries lose up to $212 billion a year to multinational tax avoidance alone. The IMF researchers also reckon that corporate tax avoidance is a far worse problem for poor countries than for rich countries, relative to the size of their economies.

That's a sum that could transform the lives of untold numbers of people living in poverty. A recent study published in the medical journal The Lancet demonstrates that when governments in poor countries increase their income from tax it leads directly to greater spending on vital healthcare.

Back in the room of tax campaigners, it was also clear to us that the OECD plan to catch up with multinationals would only tackle some of the symptoms, not the causes of global tax avoidance. Furthermore, we knew the reform process would be influenced by powerful vested interests, including accountancy giants and other multinationals with huge stakes in the status quo.

A group of people representing organizations from across the globe- decided to initiate a second investigation of the same problem, but from a different perspective. We agreed to bring together a group of senior figures with a range of experience and expertise from across the globe, and especially from developing countries.
This became the Independent Commission on the Reform of International Corporate Taxation and we asked the commissioners to consider reforms of the global tax system, from the perspective of the global public interest rather than national advantage.

The Commissioners' brief was to ask the simple questions that get to the heart of how the system 'works' and to suggest fair, effective and sustainable changes to help solve the core problems.
This week the Commission launched its landmark report at an economics event in Trento, Italy, just ahead of the G7 summit in Bavaria. The document, while only 11 pages long, delivers a devastating critique of the tax system and demands sweeping changes to the existing international rules and governing institutions.

"Tax abuse by multinational corporations increases the tax burden on other taxpayers, violates the corporations' civic obligations, robs developed and developing countries of critical resources to fight poverty and fund public services, exacerbates income inequality, and increases developing country reliance on foreign assistance", it argues.

"Every individual and country is affected by corporate tax abuse, and therefore the debate over multinational corporate tax avoidance should be widened and made more accessible to the public."


Despite the painfully evident problems caused by the fiction that multinationals' subsidiaries are independent of each another, it remains an undisputed assumption at the heart of the global tax system and acts as a block to any truly effective reform.

The OECD meanwhile is already starting to claim that its tax reform project is working. But as a number of reports and analyses are showing, its work so far will have a limited impact in richer countries and simply not deal with the fundamental problem for poor countries.
 

Read more: End transnationals' $212 billion tax dodge on poorest countries - The Ecologist

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