Calling Time - ActionAid

goveRnMenT ReSPonSIbIlITIeS
Every activity we found in this study took place in
accordance with the way laws and regulations are
routinely interpreted at national level, and frequently
with the explicit agreement of government
agencies. Developed and developing country
governments must therefore work together in a
number of areas:
1. Strengthen tax legislation and revenue
administration capacity in developing countries to
deal with taxing multinational companies.
2. Improve the transparency of corporate reporting,
by making companies’ financial reports and
beneficial ownership information accessible to the
public, and creating a global country-by-country
financial reporting standard. Our research in many
countries was inhibited by the absence of such
transparency, in particular the unavailability of
companies’ accounts.
3. Developing countries must not give away their
right to tax royalties, management fees and other
foreign payments at source, especially when
negotiating double tax agreements. It is striking
that the likely tax loss to Ghana and Zambia’s
governments from the schemes we uncovered has
been increased as a result of their double taxation
treaties with Switzerland and the Netherlands.
4. Developed countries, meanwhile, should
examine and where necessary reform the way they
tax multinationals – such as tax treaty networks,
withholding taxes, and Controlled Foreign
Company rules – to make tax avoidance
in developing countries less worthwhile, not
more lucrative.
5. G20 and EU member states must also work
together to bring a threat of renewed action to bear
against tax havens.
6. Upgrade the United Nations Committee of
Tax Experts to an intergovernmental body, in which
the political issues of international taxation can
be articulated.
The bigger prize must be a system that does not
allow large multinational companies to strip out
taxable profits from their subsidiaries, exploiting
the value of their intangible assets, the ambiguity
of the arm’s length price, and the information
asymmetry between themselves and revenue
authorities. It must be a system under which
developing countries are able to hold on to a
bigger share of taxation from multinationals based
in richer countries.
As countries around the world face gaping fiscal
deficits, tax dodging has become an issue on
which governments, pressure groups and ordinary
people around the world are finally calling time.
“by fAR The
gReATeST
ConTRIbuTIon
buSIneSS
CAn MAke To
DeveloPMenT IS
ThRough The veRy
ACT of RunnIng ITS
buSIneSS – PAyIng
SuPPlIeRS, PAyIng
WAgeS, PAyIng
TAxeS.” GRAHAM
MACkAY, SABMILLER
CHIEF ExECUTIVE
11 Calling time