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In a recent report, the British NGO Christian Aid points to the grave problems arising in developing countries when multinational corporations (MNCs) avoid taxes. The ensuing tax losses exacerbate the already difficult situation of the hungry in developing countries as state revenues are diminished. In the report “Who Pays the Price? Hunger: the Hidden Cost of Tax Injustice” Christian Aid digs into the problems caused by tax evasion. The paper provides statistical research on MNCs’ activities in three case study countries, exemplifies tax havens' role by the case of Switzerland and provides recommendations for policy making. In two additional papers the issues are reflected further.
Christian Aid, May 2013
Who Pays the Price? Hunger: the Hidden Price of Tax Injustice
March 2013
Introduction
[…] Christian Aid estimates that businesses that benefit from lack of transparency in trade and financial systems deprive the poorer countries where they trade of some US$160bn (£102bn) in tax revenues every year – far more than such countries receive in aid.
Tax revenues are predictable and sustainable sources of income. They are fundamental to allowing developing-country governments to foster human development. But most poorer countries lack the staff, expertise and access to corporate information to counter activities such as transfer mispricing, in which some MNCs manipulate the profits they make and often hide them offshore.
In this report, Christian Aid provides new evidence of how an end to such practices, coupled with appropriate development policies, could make major progress towards eradicating world hunger. We realise that not all the revenues raised would automatically be channelled to priority areas such as health and nutrition. There are other priorities such as education and infrastructure. There also remain the challenges of corruption and government profligacy; challenges to which Christian Aid and our partners are rising. But without doubt, fairer tax systems and greater tax revenues could lead to increased practical measures to reduce food insecurity. […]
Alex Prats et al. (2013): Who Pays the Price? Hunger: the Hidden Price of Tax Injustice. London.
Swiss-ploitation? The Swiss Role in Commodity Trade
May 2013
Abstract
This paper assesses the role of Switzerland, as the leading hub for global commodities trading, in terms of the patterns of prices received by original exporting countries and subsequently by Switzerland and other jurisdictions. We find support for the hypotheses that (i) the average prices for commodity exports from developing countries to Switzerland are lower than those to other jurisdictions; and that (ii) Switzerland declares higher (re-)export prices for those commodities than do other jurisdictions. This pattern implies a potential capital loss for commodity exporting developing countries, and we provide a range of estimates of that loss – each of which suggests the scale is substantial (the most conservative is around $8 billion a year) and that the issue merits greater research and policy attention.
Alex Cobham with Petr Janský and Alex Prats (2013): Swiss-ploitation? The Swiss Role in Commodity Trade. Christian Aid Occasional Paper Number 10. London.
Multinational Corporations and the Profit-Shifting Lure of Tax Havens
March 2013
Executive Summary
[...] How tax avoidance and evasion can hamper development efforts has been an important area of research in the past few years. This paper contributes to the debate by investigating the link between tax evasion and avoidance, profit shifting and tax havens. Our analysis of financial and ownership data of more than 1,500 MNCs operating in India (which is home to one-quarter of the world’s population who are undernourished) shows that in 2010 those MNCs with links to tax havens reported 1.5 per cent less profits. They paid 17.4 per cent less in taxes per unit of asset and 30.3 per cent less in taxes per unit of profit than MNCs with no such links.
These results strongly suggest that MNCs with connections to tax havens engage in profit shifting more intensively than those with no tax haven links. This confirms the notion that when corporations have tax haven links they face higher incentives (because of the low tax rates in tax havens) and opportunities (because of the secrecy provisions tax havens offer) to shift income than other MNCs.
[...]
Given the relevance of the analysis provided by the OECD in its report, which is supported by the findings of our own research, we suggest that the OECD and the United Nations Tax Committee jointly explore to what extent would an evolution towards unitary taxation with profit apportionment be more appropriate for the taxation of MNCs and lead to a fairer international tax system.
Petr Janský and Alex Prats (2013): Multinational Corporations and the Profit-Shifting Lure of Tax Havens. Christian AidChristian Aid Occasional Paper Number 9. London.
