Theresa May's Opportunity To Fight Tax Avoidance And Improve The Lives Of Millions of People Living in Developing Countries

05/09/2016 11:11 | Updated 05 September 2016
Neil Hall/PA Wire

Following a week in which tax has once again dominated the headlines - this time after Apple was presented with a €13 billion bill in unpaid taxes by the European Union - the subject remains firmly on the global agenda. It is with this in mind that G20 leaders gathered in China at the weekend, to discuss the implementation of the organisation's proposed international tax reforms.

The event was attended by Britain's new Prime Minister Theresa May, and offered her a chance to set out the UK's future global approach to tax. Given Theresa May's statement on the steps of Downing Street that she wants to create an economy that works for the majority and not just the privileged few, she now had an opportunity to show the world what this looks like.

And there is a lot at stake.

Developing countries lose hundreds of billions of dollars every year to corporate tax avoidance. Healthcare, schools and other key public services are left starved of resources as they are deprived of tax revenues, often hitting women and girls hardest. And while tax policy can often feel remote and complex, it has real implications for millions of people living in poverty.

Angom Grace in Uganda / ActionAid

This includes people like 35-year-old Angom Grace in Uganda who twice a week has to walk 30km to her nearest health centre in order to receive basic paracetamol drugs for pain relief. Raising tax revenue by preventing tax avoidance offers an important way of funding improved health services across the country and creating long term solutions to poverty.

It also includes people like Jane Irungu, a school teacher in Kenya who teaches a class of up to 80 pupils with as few as 25 books between them. Even a small improvement in tax revenue spent on education could potentially yield big results.

Jane Irungu in Kenya / ActionAid

Prime Minister May has the chance at the G20 to use Britain's influence to lead the way on global tax reform, ushering in an era of co-operation and not competition.

To be effective this would mean tackling the tax-cutting race to the bottom among countries. Poor countries are big losers in this downward spiral as they are particularly dependent on corporation tax, relying on it for about 16% of their revenue, as opposed to an average of 8% in developed countries. As IMF director Christine Lagarde said, "the problem with a race to the bottom is that everyone ends up at the bottom". As tax revenue means money for poverty fighting public services, the last place we want to end up is at the bottom with no corporate tax being paid.

Effectiveness would also mean backing the implementation of public country-by-country reporting to create greater transparency and make it harder to avoid tax. Finally it would mean making sure developing countries had an equal seat at the table when discussing global tax reform and ensuring the UK's tax policy does not harm developing countries.

In the wake of the EU referendum the UK is reshaping its relationship with the world. Taking on a new role as the torchbearer for global tax reform could win us more than a few friends.