Poverty is widespread in Africa and Oxfam says tax avoidance by firms working on the continent is making things worse (Reuters)
Oxfam is urging G20 leaders to take tough action on tax avoidance which the international aid charity claims leaves impoverished African countries billions of pounds out of pocket as corporations fiddle trade figures to dodge paying their dues.
According to Oxfam, trade mispricing - artificially reducing the reported value of imports or exports for tax purposes - is alone causing Africa to lose $38.4bn a year in much-needed lost revenues.
The charity said G20 leaders must use their summit in Russia to change the tax rules and clamp down the behaviour, which is depriving governments of some of the poorest and most desperate parts of the world money to build up their economies and tackle enormous social problems. The UN says over half of all children in Africa live in poverty.
Oxfam claims Africa's loss is the proportional equivalent to G20 countries finding a cumulative $1.2tn hole in their budgets.
"The G20 should be ashamed to be at the helm of an economic system that allows companies to rip off Africa to this extent," said Emma Seery, Oxfam's head of development finance and public services.
"The G20 would never allow companies to fiddle them out of a trillion dollars. It is an outrage that the poorest countries not only suffer this, but are not even invited to the table to take part in tax talks."
It is demanding three important changes to international tax law:
- an automatic system for the exchange of tax information that will allow rich and poor countries alike to access tax information.
- ending phantom firms by making sure company ownership can no longer be a secret and implementing public registries of beneficial ownership.
- country by country reporting for all multinational companies so that they have to be transparent about where they are paying their taxes.
At a Northern Ireland meeting, G8 leaders agreed the Lough Erne Declaration, a general document pledging to crack down on tax evasion across the world.
Finance Ministers from G20 countries have already backed the OECD's proposals on tax, including forcing multinationals to give all tax authorities a country-by-country breakdown of how much they pay to respective treasuries on earnings.
However, a leading tax reform campaigner said the plan still "ducks the big issue" and is not enough.
"It's an indication of the change in the mood and that has to be significant because without a change in mood, without a change in the underlying political world, then clearly you'd never get international tax reform. This is obviously important in that sense," Tax Research UK's Richard Murphy told IBTimes UK.
"Let's not understate the significance of them thinking that international tax abuse is an issue of political significance right at the top of the summit agenda."
However, Murphy, who is a chartered accountant and economist, added: "It does not represent the significant change that is required to tackle the scale of the problem that they have identified."
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