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Tax dodgers. Off with their heads? Well not quite. But the PM’s agenda for the G8 could mark, if not a revolution, then a hugely positive evolution in the global tax system with benefits for rich and poor countries alike. It’s a move the foot-soldiers in the Conservative Party should stand full-square behind.

Last week, invitations landed to a pre-G8 event, ‘Transparency Revolution: The G8, Tax, Trade and Extractive’. This will mark the beginning of a feverish few days in June in which, it is hoped, the UK can marshal an agreement on greater tax transparency with measures that could herald the beginning of the end for a corrosive practice that has received much opprobrium of late.

Christian Aid’s concern about tax dodging stems from the impact it has on developing countries which, it’s estimated, lose a staggering US$160 billion annually – vastly more than they receive in aid – to multinationals evading tax. This not only starves already struggling economies of vital financial resources; it also undermines the fiscal social contact by eroding accountability between citizen and state, and drives growing inequality.

This year, Christian Aid together with some 200 other UK NGOs have launched a campaign to draw attention to some of the factors which mean that today nearly a billion people still suffer an acute shortage of food. Called the Enough Food For Everyone: IF campaign, it is urging the G8 to take bold, ambitious action particularly on the issue of global financial secrecy.

While we have seen many great development achievements of the past number of years – 50 million more children in school in the past decade; 14000 fewer children die each day than in 1990; and deaths from measles have reduced by three quarters – the same cannot be said for hunger. One in eight people around the world still go to bed hungry every night and 2.3 million children die from malnutrition annually. This is not only a human tragedy on an epic scale, and the greatest moral scandal of our times, it also a blight on future generations. By 2025 nearly a billion young people will face poverty because of the damage done to them by hunger and malnutrition.

New research published this week by Christian Aid on more than 1,500 multinational corporations operating in three developing countries: India, Ghana and El Salvador shows that those with subsidiaries and/or shareholders in tax havens pay up to 30 per cent less in tax than corporations with no such links. This suggests that multinationals are incentivised to shift their profits offshore and minimise their tax bills in countries where malnutrition is still rife. In India, home to a quarter of the world’s undernourished, one in every two children is stunted.

The report goes on to show how one tax haven, Switzerland, has become the global hub for commodity traders thanks to its low tax rates, financial secrecy and trade opacity. These three factors together make the opportunities for abuse legion. Developing countries, it is estimated, could have lost as much as US$578 billion over the period 2007-2010 when trading with or via Switzerland. By comparison, ending chronic malnutrition would cost US$10 billion, and ending hunger a paltry $50.2 billion annually.

With global aid flows falling, poor countries simply cannot afford to haemorrhage this amount of money. To grow food and grow their economies, they must be able to harness the revenues they are due, along with a fair share of the profits of a new mineral boom and increasing trade opportunities.

This is an agenda the Prime Minister has been wise to seize. Recent polling commissioned by Christian Aid showed that public anger, long simmering at the perceived ease with which wealthy individuals and large corporations outflanked hapless tax collectors, has reached boiling point (a view held equally by voters across the political spectrum). But it is also an agenda that speaks directly to the PM’s own brand of progressive conservatism, and helps him resolve a niggling policy battle.

With the passing of Lady Thatcher, you can forgive Cameron for pausing a moment to consider how he will be remembered. What footage will fill the newsreels on his passing? While it may not have the existential tingle of facing down the red menace in all its guises, leading the vanguard against global tax dodging may not be a bad place to start.

The PM and supporters in his party have invested a lot of political capital in defending the UK’s overseas aid spending. They believe it is the right and proper thing to do, but it is not without criticism, not least from within the Conservative Party. But the debate is, in many ways, a distraction. Long term no-one wants a world where poorer countries are dependent on hand-outs to survive. So those who won’t back the PM on aid, should back him on tax. Short of cutting the developing world loose to suffer its own fate, which would not be without danger too all of us, genuine, deep and meaningful global tax reform is a prerequisite for a careful, managed exit from aid dependency.

But it’s not just about ‘them’. Now the (previously) rich world is also awakening to the impact of tax dodging, understanding the role that vast outflows of wealth to tax havens played in destabilised economies and recognising that in future, both economic and social cohesion will require a fairer, more transparent global tax system.

To quote Burke, a fellow Irish interloper in UK politics, you reform in order to conserve. The status quo is no longer an option. The scale and impact of tax dodging undermines countries’ sovereignty and tears up centuries old templates for shaping the relationship between citizens and the state. The OECD, not an organisation prone to hyperbole, recently went so far as to say that the battle against tax dodging was ‘about the survival of democracy’.

The PM can begin to mount the fight-back at the G8. This should include new standards for the public disclosure of the real owners of companies and trusts, so that tax dodgers, corrupt officials and criminals can no longer hide their money in phantom firms. It should also include demands for those jurisdictions in the global financial system that offer the secrecy that facilitates abuse, many of them territories under the UK’s dominion, to fall in line or face counter measures. That wouldn’t be a bad weekend’s work.

Cameron’s tax revolution. I wonder what Burke would have thought of that?

Barry Johnston is Senior UK Political Advisor at Christian Aid. He writes in a personal capacity.


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