The Bishop of Derby, the Rt Revd Alastair Redfern, has written a challenging opinion piece on why laws must change concerning multinationals and tax havens that appears in this week’s edition of the Church Times. In case you don’t read the Church Times or miss this week’s edition then the text of his editorial is produced below. Enjoy!
“The world is in turmoil. Financial markets are tetchy at the prospect of countries such as Spain, Italy and Greece failing to repay their loans, while popular dissatisfaction with austerity has triggered rioting from Athens to Ealing. In east Africa, a combination of extreme poverty, drought, fighting and international neglect has led to a famine in which millions of human beings are starving.
At times of crisis, the churches are challenged to be a guiding light, offering a moral compass, speaking truth to power and proving the kind of prophetic voice that our world needs. In 2000, they played a crucial role in ensuring that the poorest countries’ multi-billion debts were cancelled. The Christian message of jubilee, initially seen by those in power as ludicrous, became a reality when a large movement of people supported it.
The amount of debt cancelled would have taken an organisation like Christian Aid more than 1,000 years to raise. Campaigning works.
A decade on, developing countries face new challenges, which we must help equip them to meet. One is tax dodging, which Christian Aid estimates costs them some $160 billion a year. While some have questioned this huge figure, even the Organisation for Economic Co-operation and Development (OECD) has said that the problem is likely to cost poor countries more than they get in aid – some $120 billion a year.
As in the UK, this financial haemorrhaging hits basic services such as schools and hospitals – and the infrastructure that will attract investment and jobs. It also exacerbates poor countries’ dependence on aid and unsustainable debt, while their citizens suffer because their public services are starved of cash.
I am aware that a previous article in the Church Times (‘Corporate tax-dodgers will soon be on the run’, March 25) generated a lively debate on the Letters page, with one correspondent complaining that Christian Aid had become a “political organisation rather than a charity”. However, one might think that in order to tackle poverty, one has to challenge the political structures which keep people poor.
How does tax dodging on such a vast scale happen? Part of the problem is of course that revenue authorities in-country are often weak and fail to collect the taxes that they should. As the OECD will report to the G20 in November more needs to be done to build up the capacity of revenue authorities to operate effectively. But that is only one side of the problem.
The other side is the lack of accountability regarding agreements with and the operations of multinational corporations and the taxes they pay. This secrecy gives unscrupulous companies and individuals the cover they need to get away with it.
Two forms of secrecy are especially troubling from the point of view of tax justice. The first is around the finances of multinational companies, some of which use accounting sleight-of-hand to artificially shift their profits out of the countries where they are truly owed and into tax havens – where tax rates are low and secrecy is intense.
The other form of financial secrecy that especially worries tax justice campaigners is that offered by tax havens. At present, it allows individuals and firms to hide terrifyingly large sums out of tax authorities’ reach. It also helps corrupt politicians and officials to hide bribes and to steal billions from public funds, safe in the knowledge that their crimes are unlikely ever to be detected. Tax havens contribute to looting on a global scale.
A topical example is Switzerland, whose banks boast of the ‘privacy’ and ‘confidentiality’ they offer. UK citizens alone have hidden so many billions in Swiss banks’ shadowy vaults that the UK Government has recently negotiated a deal under which it will start getting tax on Britons’ money via the Swiss government, even while it remains ignorant of their identities.
The deal will produce tax revenue for the UK Treasury but harm developing countries. They too lose billions to tax havens but lack the power to do similar deals. What they need is a more global system of financial information sharing, which would make it far harder to ‘hide’ money offshore. But when rich countries like the UK do cosy deals with tax havens like Switzerland, they reduce the pressure for a more international solution.
What is to be done?
To tackle corporate financial secrecy, tax justice experts want Governments to require multinational firms to reveal more about their finances. Specifically, they are calling for the introduction of country-by-country accounting, under which companies report data such as the profits they make and the taxes they pay separately for every country in which they operate. This would make it harder for companies to abusively shift profits out of the countries where they are truly owed.
Two major opportunities for progress stand out. The European Union is debating the possible introduction of such a reform, which would be a magnificent step forward. It is vital, however, that decision-makers get the details right. While some favour legislation along the lines of America’s Dodd-Frank Act, for instance, that would fail to bite on the abusive profit-shifting which is such a problem for developing countries.
In November, meanwhile, G20 countries’ leaders will meet in Cannes, France to discuss the global economy. This is a unique chance for the churches to lend their voices to the campaign for more openness from both companies and tax havens so that developing countries have the information they need to challenge tax dodgers.
Like the Jubilee debt campaign, the churches can play a role in challenging the structures that keep people poor. The Church of Scotland and the Baptist and the Methodist Churches have all lent their voice to the campaign. Now the Church of England has an opportunity to do the same.
We pray daily for God’s Kingdom to come on earth, as it is in Heaven. Here is a very practical way of enabling that peace and justice to advance into millions of lives, and into the structures through which our common life needs to work.”
Join the campaign at http://www.endtaxhavensecrecy.org/.