Tax in Developing Countries: Increasing Resources for Development

TAX 2

Written evidence submitted by a network of Quakers

Submission on Tax and Development

By a network of Quakers concerned with economic issues 

1. We were pleased to hear of this inquiry as we consider the link between tax, development and global poverty to be of critical ethical importance. Your call for submissions seems to cover most issues that need to be addressed.

 

2. We are acutely aware that capital flight, transfer pricing and money laundering - to the detriment of developing countries - is facilitated by secrecy jurisdictions.

 

3. In recent years it seems that financial interests have outweighed all other considerations in the making of government policy. We are concerned that ethical principles should take precedence in your recommendations.

 

4. One of our members, Richard Murphy, has submitted evidence to you on behalf of the Tax Research UK. This is based on extensive research and we would like to add our full support for his submission.

 

5. The Committee may also wish to examine:

a. The implications for developing countries of relevant aspects of the UK’s tax code and suggested reforms, including the recent proposal for a General Anti-Avoidance Principle (GAAP).

b. The role of intermediaries in facilitating capital flight and money-laundering from developing countries often through structures such as trusts, shell companies and foundations (and a mixture) to hide the real beneficial owner of assets.

c. The ways in which secrecy jurisdictions and the activities associated with them distort economic decision-making and market signals, for example by giving an effective tax subsidy to multinationals relative to developing countries’ domestic private sectors.

The purpose of the tax system should be for everyone to pay the right amount of tax, in the right place, without the tax jurisdiction being divorced from the location of the underlying economic activity.

6. It is essential that corporations are required to report their profits country-by-country, not region-by-region.

7. We would like you to consider that tax avoidance using secrecy locations should be treated as an offence under criminal law. Those responsible, including their advisers, and the recipients of their funds, could then be prosecuted in court. We have seen that tax offences under existing regulations have ended in unsatisfactory compromise - such as with Switzerland - with immunity from prosecution for the recipients (of stolen goods). We are impressed with this legal approach described in Eradicating Ecocide by Polly Higgins.

8. We have read and support Christian Aid’s report: The True Toll of Tax Dodging, which says in its introduction: "This report seeks to expose the scandal of a global taxation system that allows the world’s richest to duck their responsibilities while condemning the poorest to stunted development, even premature death. … We predict that illegal, trade-related tax evasion alone will be responsible for some 5.6 million deaths of young children in the developing world between 2000 and 2015. That is almost 1,000 a day. Half are already dead."

9. The Spirit Level by Richard Wilkinson and Kate Pickett shows that the level of inequality in a society is strongly associated with levels of happiness and contentment and the prevalence of social problems. Increasing inequality in the UK, now approaching the worst levels in Victorian times, is seriously exacerbated by financial deregulation and the use of secrecy locations. There is serious risk that social disorder will increase in scale.

10. In the past members of the public were bewildered by the complexity and secrecy of financial arrangements. This has changed and there is daily exposure of disgraceful financial theories, systems and activities. The level of public anger will only grow as inequality and deprivations increase. It is essential that the problem should be tackled at source urgently.

signed

Simon Bond Maidenstone

Gail Bradbrook Nailsworth

James Bruges Bristol

Roger Cullen Witney

Jill Green Oxford

Susan Holden Richmond North Yorkshire

Sarah Lasenby Oxford

John Long Bristol

Steve Mandel Reading

Fiona Mullins Oxford

Richard Murphy Norwich

Chris Stapenhurst Aberdeen

Janet Toye Oxford

Tony Weekes Belfast, Northern Ireland

Gill Westcott Exeter

1 February 2012