ActionAid : Almost half of all investment into developing countries goes through tax havens

Almost half of all money invested in developing countries is channelled through tax havens, a new ActionAid report revealed today.

The report, How Tax Havens Plunder the Poor, shows how tax havens can often allow companies and investors to avoid tax on the resulting profits and gains – depriving the world’s poorest countries of much-needed tax revenue.

The research also shows that foreign investments into developing countries are more likely to be routed through a tax haven than investments into developed countries.

Mike Lewis, ActionAid’s tax expert who carried out the research, said:

“As we have seen with recent cases like Google and Amazon, tax avoidance is a huge issue here in the UK. But evidence shows that poor countries are losing even more from tax avoidance, and are least equipped to protect fragile public revenues.

“Developing countries are being deprived of billions of dollars of tax revenue by wealthy corporations and investors using secretive tax havens. Tax havens are one of the main obstacles in the fight against global poverty. Their secrecy and harmful tax regimes leach money out of developing countries that could be used to end hunger and provide hospitals, schools and clean water.”

In one case a single - entirely legal - transaction through UK-linked tax havens would have provided $2.2 billion in tax if it had not taken place offshore, according to the Indian government. This is almost enough money to provide every Indian primary school child with a subsidised midday meal for an entire year.

In another example, one major mining firm gets 84 per cent of its revenues from Africa, yet has just four of its 81 subsidiaries registered in African countries, and 47 registered in tax havens.

Using tax havens is not illegal or proof of tax avoidance, but can often allow companies to minimise taxes and keep financial transactions opaque.

ActionAid’s report comes shortly before the G8 Summit in June when world leaders, including David Cameron, have an historic opportunity to call time on tax havens.

The UK is currently responsible for one in five tax havens globally – more than any other country. Recent research by ActionAid has also demonstrated the heavy involvement of British companies in tax haven-use with 98 of FTSE 100 companies using tax havens. G8 countries are collectively responsible for 40 per cent of tax havens.

The OECD estimates that developing countries are losing three times more money to tax havens than they currently receive in aid each year.

ActionAid welcomes the pressure that the UK government finally appears to be putting on the UK’s own tax havens in recent weeks – pushing them to join information deals with other European countries, and asking them to sign a multilateral convention on international tax cooperation. David Cameron and George Osborne have also highlighted the need for these tax haven deals to include developing countries too, but so far there is no concrete indication about how developing countries will actually be involved.

ActionAid is now calling on the Government and G8 leaders to put their words into action and mark the end of tax havens by ensuring tax havens share tax information will the poorest countries, and that the real ownership of all companies and trusts are placed on public record.

ActionAid is also part of the Enough Food For Everyone IF campaign which aims to tackle global hunger by calling on governments to close tax loopholes which enable corporates to avoid paying their fair share of tax.