The scandal of world hunger could soon be ended if the revenues that developing countries lose through tax dodging were available to them to invest in agricultural development, says a new report from Christian Aid.
One in eight of the world’s population goes to bed hungry, with progress disappointing towards the global goal of halving world hunger by 2015.
The UN’s Food and Agriculture Organisation (FAO) recently cited US$50.2bn per annum, on top of existing funding, as the cost of creating a ‘world free from hunger’ by 2025.
Christian Aid’s report 'Who Pays the Price? Hunger: The Hidden Cost of Tax Injustice', says that amount, and more, would be raised every year if governments ended tax haven secrecy and curtailed profit-shifting and tax dodging by multinationals in poor countries.
The report is published in the run-up to next month’s G8 summit in Northern Ireland with the UK holding the Presidency. Christian Aid and other agencies in the Enough Food For Everyone IF… campaign want Prime Minister David Cameron to use the summit to make tax justice a major weapon against poverty and hunger.
Publication also marks the launch of Christian Aid Week, Britain’s longest running door-to-door fundraising week, which this year focuses on fighting global hunger.
Report author Alex Prats said: ‘Malnutrition and related causes lead to the death of 2.3 million children every year. In the developing world, it is the underlying cause of the deaths of 35 per cent of all children under the age of five.
‘At the Millennium Summit in 2000, and later in 2009 at the World Summit on Food Security, political leaders agreed to halve hunger by the year 2015.
‘But despite the promises made, progress has been disappointing. In Africa, the number of hungry people has actually increased by 36 per cent over the period 1990-2012, from 175 to 239 million people.
‘If developing countries were able to increase their tax revenues and make effective use of the financial resources available, poverty and hunger could be eradicated. One of the main reasons they can’t is because of tax dodging.’
The report looks at the impact of tax dodging on three countries in the developing world with economies strong enough to put them in the middle income bracket, but where malnutrition remains rife.
A survey of more than 1,500 multinationals in the three countries – India, Ghana and El Salvador – found that those with subsidiaries and/or shareholders in tax havens paid on average 28.9 per cent less tax per unit of profit than those without such links. In India the figure rose to 30.3 per cent.
As the report shows, financial secrecy facilitates corruption too. The report estimates that between 1948 and 2008 India in fact lost some US$462bn through illicit capital flight and tax dodging by multinationals, other businesses trading internationally, and wealthy individuals.
More recently, India’s Directorate of Transfer Pricing reported that the amounts involved in mispricing ran at US$8.1bn in 2010-12, and US$12.6bn in 2011-12. Corporation tax of 33 per cent on these amounts would have provided an extra US$6.9bn.
Although India’s gross national income (GNI) per capita doubled between 1995 and 2010, 41 per cent of its 1.2 billion population live on less than US$1.25 a day, with the country home to one quarter of the world’s undernourished people.
In Ghana, where nearly 30 per cent of children under five are stunted by malnutrition, the report estimates that multinationals artificially lowering their tax liability accounted for the loss of US$83.6m in 2008 alone.
And in El Salvador, where 47.5 per cent of the population lives in poverty, tax evasion and corporate tax incentives are thought to cost more than US$2.9bn every year.
The report also looks at the role that one tax haven, Switzerland, plays in enabling multinationals to shift profits and dodge taxes. It estimates that developing countries may have lost US$578bn in capital from 2007– 2010, and the tax revenue it would have brought, from trading with or via that one country alone.
The findings follow earlier Christian Aid research suggesting that, globally, tax dodging costs poor countries some US$160bn every year. They come at a time of growing global concern about multinational tax dodging in countries where they operate – including the UK.
Christian Aid and its partners in the Enough Food For Everyone IF… campaign say a new international convention on tax transparency is needed, which G8 countries should sign up to, and then pressurise tax havens to ratify.
The true ownership of companies and trusts should be put in the public domain, and new accounting rules introduced that oblige multinationals to publish details of the profits made and taxes paid in every country where they operate, so that tax abuse can be quickly identified.
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