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Time for the UK to Keep Its Promises on Global Tax Reform

13/07/2015 16:45 BST | Updated 10/07/2016 10:59 BST

This week politicians from around the world will be in Ethiopia for the United Nations Financing for Development conference to discuss a critical question for both rich and poor countries - which global organisation should set the international rules for taxing corporations?

It is a question with enormous implications for developing countries, including some of the poorest countries in the world. According to recent figures from the United Nations, developing countries may lose at least $US100 billion a year to corporate tax avoidance, while IMF researchers have offered an even higher estimate of $200 billion a year.

That is money that could have a huge effect on tackling poverty - by building schools, hospitals and the kind of infrastructure needed to grow economies. But only if it can be collected.

It is also an important week for the UK Government. Among those travelling to Addis Ababa will be Justine Greening, Secretary of State for International Development. The UK has been vocal in its determination to tackle international tax avoidance and help the world's poorest countries. But observers will be watching to see whether this is rhetoric or a commitment to concrete action.

One of the most contentious issues at the conference is whether the Organisation for Economic Co-operation and Development (OECD) should maintain its dominance over global tax policy. The OECD already has a series of proposals on the table designed - among other things - to increase the flow of information to tax authorities make it harder for companies to shift their profits into tax havens.

But as time has passed it has become increasingly clear that these proposals will do little for developing countries, which from the beginning were not treated as equal partners at the table. The OECD has long been criticised as a rich nations' club that primarily acts in the interests of the world's most powerful countries. It is clear that its current proposals do not touch many of the key problems facing developing countries in taxing multinationals.

ActionAid revealed last month that a mining company in Malawi avoided an estimated $43 million in tax over six years through a combination of generous tax breaks from the government and channelling its profits through a subsidiary in the Netherlands, a tax haven. This is money that could otherwise have paid for thousands of teachers or nurses, but the OECD proposals will not tackle the pressure of tax competition which leads governments to offer big tax breaks, nor will it address the limits placed on the taxing rights of developing countries by tax treaties.

ActionAid agrees with the G77 group of developing countries that if the United Nations played a central role in global tax policy, rather than the OECD, then the results would be more favourable to poorer countries. The United Nations would be a more representative body, obliged to include everyone in policy making - not just the richest nations.

This is why it is such a crucial moment for the UK Government. At present there is a contradiction in UK policy. While the Government rightly gives significant money to aid programmes - more than many other developed nations - they are, at the same time, blocking this proposal that could help unlock the billions from proper tax reforms. Countries that are in desperate need of help and assistance are seeing millions of dollars of money disappear due to this inaction.

But if Justine Greening was to change the UK's position on a global tax body, it would not only increase the chances of a successful agreement at Addis, but also generate a huge amount of goodwill which she could use to ensure greater progress on the UK's other priorities, such as gender equality.

The impact of this summit will be felt for decades to come; let us hope that governments, including the UK, rise to the challenge.