2 June 2015 - Christian Aid today applauds a new report which demands fresh solutions to tax dodging by multinational companies – a problem IMF researchers say could be costing developing countries $212 billion a year.
The report, from the Independent Commission for the Reform of International Corporate Taxation (ICRICT), warns that existing global tax rules are ‘obsolete and ineffective in preventing tax abuse by multinational corporations’, because they are based on the legal ‘fiction’ that multinationals’ subsidiaries are separate entities.
It also argues that tax reform efforts by the Organisation for Economic Co-operation and Development are ‘a step in the right direction but fundamentally inadequate’ - and that the OECD does not reflect the priorities of poor countries.
The new report comes days after International Monetary Fund researchers suggested that poor countries are losing as much as $212 billion a year to tax avoidance by multinationals – and considerably more than rich OECD countries, relative to the size of their economies.
Toby Quantrill, Principle Economic Justice Adviser at Christian Aid, said: “This is a staggering sum, which represents untold damage to the public services needed by people living in poverty in developing countries.”
He added: “ICRICT’s diagnosis is spot on, as is its argument that rich countries’ efforts to stop multinationals dodging tax are a step in the right direction but fundamentally inadequate.
“It is becoming ever clearer that the OECD’s work will be ineffective even for the richer and more powerful countries and do little or nothing for the poorest.
“It’s time for developing countries to start adopting their own reforms now, and for truly inclusive international co-operation that tackles tax reform from the perspective of the public interest.”
Examples of reforms that developing countries could adopt now are the imposition of withholding tax regimes to tax dividends before they can be paid to shareholders and the creation of bilateral or multilateral agreements to enable jurisdictions to apportion between them the revenues and costs attributable to multinationals operating within their borders.
In the longer term, the report suggests fundamental reform to the global institutions and rules by which multinational companies are taxed.
Christian Aid is part of the coalition of organisations that set up and supported ICRICT, along with Oxfam, ActionAid, the World Council of Churches, the Tax Justice Network, the Global Alliance for Tax Justice, Public Services International, Alliance Sud, CCFD-Terre Solidaire, the Council for Global Unions and the Friedrich Ebert Stiftung.
ICRICT is chaired by Jose Antonio Ocampo, a former United Nations Under-Secretary General and former Minister of Finance in Colombia, and includes a range of other tax and economics experts. The Commission aims to consider international corporate tax reforms from the perspective of the public interest, rather than national advantage, and to seek fair, effective and sustainable tax solutions for development.
Its full report, and details of all the Commissioners and the process used to develop the report, are available on the ICRICT website: www.icrict.org
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Notes to editors:
1. Christian Aid works in some of the world's poorest communities in around 40 countries at any one time. We act where there is great need, regardless of religion, helping people to live a full life, free from poverty. We provide urgent, practical and effective assistance in tackling the root causes of poverty as well as its effects.
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