Tax transparency is crucial to supporting developing countries and stopping corruption

Tax transparency is crucial to supporting developing countries and stopping corruption

24 April 2017

Recently the Panama Papers Inquiry Committee in the European Parliament heard from tax specialists in Africa about the impact of tax avoidance and evasion on the continent.

The impact of the papers leak on developing countries was enormous, with investigations and probes being launched against industries and individuals in countries such as Tunisia and Nigeria, and exposed offshore holdings held by Government officials in Rwanda and the Democratic Republic of Congo.

In total, 52 countries were mentioned in the Panama Papers and 44 of them involved activity from Mossack Fonseca directly. This information may never be known to governments, tax authorities or citizens without whistle-blowers coming forward and making the information public.

This highlights two key issues:

1. We need more cooperation at a global level on the exchange of tax information
2. We need better protection of whistle-blowers who can bring illegal activity into the light


Nuhu Ribadu, a former Government Minister in Nigeria and now an anti-corruption official highlighted the work done in his country to identify how illicit financial flows had taken money from Nigeria and into tax havens around the world. He emphasised how the Panama Papers revelation had triggered a ‘firestorm’ of action that had led to concrete efforts to introduce registers of beneficial ownership to identify the routes used to move untaxed profit out of the African countries.

Alvin Mosioma, the founding Executive Director of Tax Justice Network Africa has been a leading voice on tax policy in Africa. He told MEPs that the EU must do more to raise awareness among governments of developing countries on the necessity to renegotiate unfair tax treaties, as too often developing countries sign unfavourable tax treaties that back them into a corner and take away their taxation powers. He therefore called on the EU to step up and ensure better policy coherence with developing countries to avoid this ‘race to the bottom’ and creation of tax havens.

The key tool in strengthening the economies and stability of developing countries is empowering them to tax their profit where it is made. Oxfam showed that developing countries lose $100bn every year as a result of corporate tax avoidance schemes, which is more than enough to provide an education for all of the 124 million children currently out of school, and to pay for health interventions that could save the lives of six million children.

The amount of money taken from developing countries is staggering. Action Aid estimated that the same developing countries lose a further $138bn through tax incentives designed to attract large multinational businesses to their country. These figures completely dwarf the amount of money provided in foreign and development aid and can be shut down through better tax transparency on a global level.

The speakers on the panel were unanimous in their support of a global register of beneficial owners. Being able to track the sources of illicit financial flows out of developing countries to the individuals who financially benefit from them would help crack down on money laundering and tax evasion. If we knew who owned every company and shell company in every jurisdiction, it would be much easier to track money moving through complex networks.

There was also clear support for the EU’s initiative to introduce public country-by-country reporting. By making the revenues and profits of multinational companies operating in the EU public, and by making them provide information on all of their global profit and tax on a country-by-country basis we can shine a light on exploitative practices around the world. Transparency will help reveal the scale of the problem and spur action to end corporate tax dodging permanently.

Many of the positions supported by the panellists were those that we have campaigned hard for as Labour MEPs. The Panama Papers have helped spur an angry call for action not just in the EU, but all around the world.

We should not be reliant on good Samaritans risking their freedom to expose illicit financial activities – the information should be public so that citizens in the EU and developing countries can hold their government and multinational corporations to account.

 

By Linda McAvan MEP and Anneliese Dodds MEP. This blog post originally featured on Left Foot Forward which can be accessed here. 

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