Theft on a global scale

Corporate tax dodging was front and centre in the most recent election campaign, with leaders on both sides of the political spectrum pledging to take action against tax dodgers.

 
Many of us may think of tax avoidance as a murky and illicit practice – something done behind closed doors, with suits and ties consulting other suits and ties how to ferret away their millions and further deprive their nation’s public coffers.

 
While there may be some truth to this image, in reality, many if not most forms of tax dodging are perfectly legal. It’s a sanctioned form of theft that’s bleeding the many in the interests of the few.

 
And according to a new report from the Independent Commission for the Reform of International Corporate Taxation (ICRICT) published on Tuesday (June 2), putting a stop to tax-dodging multinational companies will necessitate a radical overhaul of outdated policies on a global scale.

 
Tax dodging toll

 
Just how much does tax avoidance affect average people?

 
We see big headline splashes in the papers about one company or another caught avoiding taxes – Google, Amazon, Vodafone, and others.

 
But tax avoidance happens on a much grander and global scale – and it robs hundreds of billions of pounds from low- and middle-income people, hurting developing countries the most.

 
According to the ICRICT report, $100bn per year is taken from developing countries as a direct result of multinational companies dodging taxes.

 
“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,” the report notes.

 
Another earlier report from Christian Aid looks beyond the money lost and demonstrates how corporate tax loss costs lives, as it cripples developing countries’ governments to provide social services to its people, including health provision, education and other modes of support.

 
According to its analysis from 2008, 5.6m young children will have died between 2000 and 2015 because of illegal, trade-related tax evasion alone.

 
Because many of these developing countries rely on foreign aid, the ICRIT report notes, the UK taxpayer is effectively subsidising multinational corporate profits through the foreign aid budget.

 
Here at home, it is estimated that the UK loses nearly £70bn a year from tax evasion, which, according to the Tax Justice Network, comprises more than 50 per cent of the country’s total healthcare spend.

 
Radical action needed

 
When tax avoidance had risen high on the list of election-time issues, chancellor George Osborne proposed a “Google Tax” which would purportedly force companies making profits in the UK from diverting them elsewhere to avoid tax.

 
But the ICRICT report noted that much more needs to be done on a global scale to address what is essentially a global problem.

 
The report pointed to the principle of “separate entity” in which a single company can present their operations in different countries as separate entities, and in so doing avoid taxes.

 
“We believe the only effective way to stop [tax] abuse is to treat multinational corporations as single and unified firms and divide the taxable profits between the countries where the income generating activities are located,” the report noted.

 
“If multinational corporations were taxed as single and unified firms, there would be no transfer pricing because global corporate profits would be consolidated, and thus no profits would be gained or lost through intra-company transactions.”

 
The ICRICT report also calls for greater transparency of profits and taxes paid in each country in which a multinational corporation operates, as well as encouraging greater international cooperation in tackling global tax abuse. The report moreover calls on governments to rein in tax incentives which create a global race to the bottom.

 
Most pressing issue of our time

 
Unite assistant general secretary Steve Turner hailed the report for highlighting how dire the problem of global tax abuse is.

 
“Today’s report just confirms what we here at Unite have been saying for a long time – that tax-dodging is not simply restricted to the domain of a few corporate baddies,” he said. “It’s a pervasive practice that’s so entrenched among the elite and many of the profit-crazed global multinationals they run, that within their ranks, it’s seen as normal. Even millionaire hedge fund manager Lord Fink admitted as much earlier this year – ‘Tax avoidance,’ he said, ‘everybody does it.’”

 
“But at what cost? Our economies struggle under the weight of continued neoliberal austerity while billions of pounds are syphoned off annually to the nearest tax haven by profitable corporations and obscenely wealthy individuals,” Turner added.

 
“Governments continue to follow an ideological path to cutting debt leading directly to attacks on our welfare state, charges for our children to attend universities, a failure to invest in both infrastructure and desperately needed housing, cuts to essential public services and underfunding our of NHS.”

 
Turner agreed with ICRICT’s recommendations, noting the scale of the challenge laid before us.

 
“Corporate theft through tax avoidance continues on the massive, global scale and it will require not only close international cooperation but more importantly, steadfast political will to take on massive corporations that at this point in history wield formidable influence on all our public institutions,” he said.

 
“Tackling global tax avoidance may prove to be one of the most difficult – but remains one of the most pressing – issues of our time.”