The Power of Tax

Thursday, July 4, 2013 - 01:01

Across the world, wherever you live, governments are struggling to pay for public services.

When faced with complaints about crowded classrooms, shortages of nurses and crumbling roads, governments shrug their shoulders and point to empty budgets.

Most public services cost money, so the money governments have coming in is just as important as what they spend – making tax very powerful.

When collected and spent properly, tax has the power to transform the lives of people living in poverty. But unfortunately, this isn’t always the case. 

That’s why today, we’ve launched a new international campaign called Tax Power, which aims to clamp down on tax avoidance and help you tell your governments how tax money should be spent.

Our work on tax so far

We’re not new to working on tax. In fact, we started to look at the links between tax avoidance and poverty back in 2008 as the global financial crisis hit many countries around the world.

Since then, we’ve uncovered some of the massive losses in tax money that developing countries are forced to accept, as a result of big companies using legal loopholes and tax havens to avoid tax – such as the case of Zambia Sugar , which is controlled by food giant Associated British Foods.

We also revealed that almost 50% of all investments to developing countries are routed via tax havens. This contributes to the astounding US$120 billion that developing countries lose in tax money that is removed from their countries and hidden in tax havens every year – as revealed by the Tax Justice Network.

Corporate tax breaks

Today we’ve launched a new piece of research looking at corporate income tax breaks. These are tax breaks on corporate profit, which give companies a reduced or zero tax rate on their profits.

When companies make a profit, they should pay their fair share of tax. When we looked into this in more detail, the results were shocking.

Globally, we estimate that the developing countries lose at least US$138 billion tax every year, as their governments give tax breaks to some of the world’s biggest and most profitable companies.

US$138 billion – that’s a lot of money! It’s enough to send the 57 million children in the world that currently don’t get a primary education to school, and meet the global anti-poverty targets to provide basic health care in all countries around the world, and provide the agricultural investment needed to end hunger. All that with some money left over!

All take and little return

When they set up their business in a country, big companies rely on workers, services like the judiciary and education, infrastructure and raw materials. So it’s only right that they should contribute towards the cost of this by paying tax on their profits.

But instead, the economies that they rely on to make their profits are growing weaker, while these big companies get fatter. They are sucking the lifeblood out of poor countries and contributing little in return.

We have to change that. And I mean we – not just ActionAid!

We have to use our Tax Power to bring about the change we want to see – from corporate tax dodgers, to the governments that allow this to happen.

Our Tax Power campaign that launches today will show how tax can change people’s lives when spent on public services. Tax power is what governments must use to help people realise their human rights. Tax power is what you can use to demand companies pay the tax they should be paying.

Change is coming. Governments are beginning to clamp down, update the rules and lift the lid on the tax secrecy. We’ve helped to make this happen with pioneering research from UK, Sweden, Zambia, Ghana and Bangladesh.

It is time for governments to stop corporate tax dodging, end harmful tax breaks, and increase tax transparency. But to do it we need you to take the power back.