Death and taxes

An excellent report from Christian Aid Ireland has just been published. It paints a graphic and disturbing picture of the global economic system and the devastating impact of policies sustained by transnational corporations (TNC) and the governments that serve them. Have any of the US Presidential candidates even mentioned issues such as this?

The report, Death and taxes: the true toll of tax dodging, shows how the global taxation system allows the world’s richest to avoid social responsibilities while continuing to under-develop much of the world. This system costs poor nations far more than they receive in all the governmental and private aid. It’s essentially a relentless mechanism for taking money from the poor to give to the rich.

As the report says,

This is in part to do with super-rich individuals. It is also to do with governments, including the UK government, who have let this situation develop and persist. But it is mostly about the world’s transnational corporations wielding their enormous power to avoid the attentions of the tax man – with devastating results.

The situation is stark and urgent. 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.

Corporations “avoid…the tax man” in various ways, including setting up legal schemes for tax-avoidance and demanding tax concessions and low royalty rates on output. They also use false accounting, such as fake invoices, mispriced transfer of goods, services, and finances, and illicit transfers of cash.

Research by Raymond Baker, a senior fellow at the US Center for International Policy, says that 7 per cent of global trade involves the illicit movement of capital between countries by TNCs and other business entities. Transfers of goods and services within a TNC are mispriced to take advantage of differing tax rates and to minimise profits where they are high. Accomplices in unrelated companies issue false invoices to disguise the profits made in a transaction and reduce the tax liability. Baker says:

For the first time in the 200-year run of the free-market system, we have built and expanded an entire integrated global financial structure the basic purpose of which is to shift money from poor to rich. [It is] the ugliest chapter in global economic affairs since slavery.

The Death and Taxes report provides much more detail on the real, immediate, and personal impact of what may seem to be an obscure or esoteric issue. It also offers recommendations for what can be done about it. The data and analysis support the efforts of the Organisation for Economic Co-Operation and Development to regulate tax havens and end the secrecy. They also show the urgent need for an international accounting standard that requires companies to reveal country-by-country accounting.

Aid from organizations such as Christian Aid Ireland is vital in today’s world. But the bottom line on the accounting here is that if wealthy nations abandoned all their aid programs they would be more decent partners in the world than they are now, if they simply acted honestly and fairly with others.

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