One of the main reasons developing countries are unlikely to achieve many of the Millennium Development Goals, and escape the persistent poverty that plagues even those poorer countries that achieve decent levels of economic growth, is a lack of government revenue to pay for schools, hospitals, roads and other public services. As recession in developed countries provides yet another excuse for them to renege on their overseas aid commitments, every last drop of government spending is important.
Every week, multinational companies operating in developing countries receive a gift of well over two billion dollars in the form of tax incentives, exemptions from the standard tax regime that others have to follow. Supposedly to encourage companies to invest, in practice these incentives subsidise profitable investments that in most cases would have been made anyway, and some even ‘crowd out’ local investors. Tax incentives are a product of faulty economic logic, poor policymaking and sadly sometimes corruption that has pitted developing countries against each other in a downward spiral of tax competition.
Correction: Page 7 of the first version of this publication stated that USD $3 billion ($3,000 million) in tax had been foregone to tax incentives given to a selection of companies in Malawi between 2008 and 2012. The correct figure, as in ActionAid partner Malawi Economic Justice Network's report, is USD $300 million. The publication was updated accordingly as of 21 August 2013.