The Blog

Tax Dodging and Global Poverty: What the G8 Must Deliver

Over the next two days leaders of the G8, the world's eight richest countries, will meet to discuss reforming the global tax system. Over these 48 hours, developing countries will lose £1.4billion to tax dodging.

Over the next two days leaders of the G8, the world's eight richest countries, will meet to discuss reforming the global tax system. Over these 48 hours, developing countries will lose £1.4billion to tax dodging. I'm in Northern Ireland with some of my ActionAid colleagues including Pamela Chisanga, Director of ActionAid Zambia, to try to impact on the last minute negotiations.

We have worked hard to influence the agenda of this G8 meeting. Eighteen months ago we began pushing for tax justice to be an area that leaders should prioritise for action. We are pleased to have had a real impact so far, with the UK Prime Minister making action on tax dodging and "developing countries to prosper" a top priority, alongside other issues like transparency, trade and the terrible crisis in Syria.

Over 200 UK anti-poverty organisations have been working together as the Enough Food for Everyone If campaign to highlight the fact that poor countries lose three times more to tax havens that they receive in aid every year - vital funds that should be spent on public services like schools, hospitals and roads and not siphoned into the offshore accounts of huge companies.

This morning Pamela took this message to UK Prime Minister David Cameron, chair of this year's G8 Summit. She told him that she was worried that the G8 Leaders are going to agree a deal on tax dodging that shuts out developing countries. Pamela talked about Caroline Muchanga, a market trader in Zambia, who earns just $4 on a good day and sometimes cannot afford to feed her children. But Caroline pays more tax than the British multinational food company based next door to her stall - the very definition of injustice. Pamela asked David Cameron to ensure that she could take a message back to Caroline after the G8 that things were going to change.

Pamela is worried about the outcome of the G8 for very good reason. To defeat tax dodging and shut down tax havens, there is a mountain to climb. But the hard work would be more than worth it if we can get there because of the transformative effect that it would have on developing country finances.

This mountain will not be scaled by the G8 in the next two days but there is the possibility that we can advance into the foothills.

Until recently, leaders of rich nations like those of the G8 were all too happy to turn a blind eye to tax dodging. Only with pressure from campaigners, and when their own countries were hit by the economic crisis, did they begin to take notice of a problem that had been staring them in the face all along - one that hurts rich and poor countries alike.

Countries like the UK shoulder a large burden for the existence of tax havens, which are the life support system for tax dodging. The UK is responsible for one in five of the world's tax havens in the form of the Crown Dependencies like Jersey and Guernsey, and the Overseas Territories like the Cayman Islands and the British Virgin Islands. The UK has legal and constitutional powers over these places. The good news is that on Saturday at a pre-G8 summit all 10 of them agreed to join an existing multilateral agreement to share tax information; an agreement which some developing countries are part of. This represented a step forward on tax justice: a first step up the mountain, if you like.

In the next 48 hours at the G8 we may or may not get progress in three areas:

  • A 'gold standard' agreement on automatically sharing tax information that is vital for tracking down tax dodgers. There is a serious risk that this will be between rich countries and tax havens, and will shut poor countries out in the cold.

  • Agreement to hold central registers of the true 'beneficial' owners of shell companies - more crucial information in the battle against tax dodging. The danger is that these registers will be privately held and not publicly available. You can't advance tax transparency with secret lists and again, there is a risk that developing countries will be unable to access this data.
  • Progress towards making multinational companies report the profits they make and the taxes they pay on a country-by-country basis, rather than as one consolidated global figure. Making this information publicly available and not kept secret between companies and tax authorities is essential.

Ambitious agreements to act in each of these areas would signal a real advance from the G8 into the foothills of that tax justice mountain. But to stumble and fall because it is all too difficult would be a massive let down to Caroline Muchanga in Zambia and the millions of hard-working people just like her across the world.

As Pamela Chisanga told David Cameron: in the next two days the G8 must not turn their backs on the world's poorest people.