ActionAid is a global movement of people working together to further human rights and defeat poverty for all.

Pulling back the curtain: tax havens are plundering the poor

The representatives of big business, including the big accountancy firms, have been scurrying in and out of politicians’ offices trying to persuade them that getting companies to pay their fair share of tax is a dreadful idea.

Using the secrecy that tax havens provide, they are waving the argument that they bring jobs and investment in front of our faces, while holding the taxable profits firmly up their sleeve

In a new report published today, ActionAid UK shows that almost half of all money invested in developing countries is channelled through the secretive and murky world of tax havens – bad news for governments trying to collect tax on company profits.

Some big companies are claiming to be citizens of nowhere, reporting fragments of their accounting in different jurisdictions, setting up endless shell companies, and moving their money around so much that the tax man loses sight of where it is.

But there is always a loser in this game. School-children sitting on the floor sharing books, health clinics running out of medicine, dirty water and poor roads are not just empty phrases, they are daily realities for many people struggling to get by.

Billions of dollars are leaking out of cash-strapped developing countries’ coffers due to tax havens

Caroline Muchanga is a small business owner and mother-of-two, living in the shadow of British sugar giant Associated British Foods’ sugar plantation in Zambia. While she pays her tax according to the rules, her tax-deprived government doesn’t have enough money to pay for the essential public services for her children and community because of tax dodging by companies like ABF. This financial trickery, while not illegal, has deeply immoral consequences, hitting those most exposed to life’s shocks the worst.

African governments are certainly starting to get sick of the bullying by multinationals. In the last month alone, the world’s biggest rose producer has been found guilty of transfer mispricing by the Kenyan Government, and new laws are set to be brought in by the Zambian government forcing companies to prove why they are moving money offshore.

Former UN-Chief Kofi Annan and former South African President Thabo Mbeki have both spoken out heatedly about the huge amount of money flowing out of Africa and into tax havens. The African Union must take a united stand to stop the tax drain, in order to end poverty.

Developed countries, where most of the big multinationals have their headquarters, cannot ignore the responsibility they have. Yesterday, European Union leaders met in Brussels, with clamping down on tax dodging on their agenda.

But they must move faster to end this scam and fix the broken tax rules, with straightforward measures such as blacklisting tax havens, automatically sharing tax information with poor countries, making companies register their true owner, and making companies publically report the tax they pay in every country.

Tax dodging companies may be putting pressure on governments, but the global movement for tax justice is growing.