Last week I saw a screening of UK Gold, a new film that explores the issue of corporate tax avoidance. Basically this means many multi-national companies list their registered offices as being places like the Cayman Islands, Jersey and Bermuda. Despite not providing any goods or services in those nations, and usually not employing anyone in those territories, by listing themselves as based there they can avoid paying taxes.
This leads to a huge series of injustices. In developed countries such as the UK, it means the corporations we all buy goods and services from are often not paying their fair share of tax into the national government coffers. So individuals have to pay more tax, to cover the basic public services we all need and benefit from.
In developing countries the inequality becomes even worse. Many multinationals that work in developing countries, in areas like mining and construction, actually only pay tiny amounts of tax (if anything) on the wealth they are extracting, and the profits they are making. It’s estimated the amount of tax that should be going to the national governments of developing nations is ten times the amount of aid that they receive from Western governments. And all this means they continue to struggle in providing health, education, clean water and other basic infrastructure requirements to their citizens.
Have a look at this film from the Tax Justice Network to help make it all become a little more clearer.
Now, what’s even more shocking is that much of this injustice is being perpetuated by the City of London. The City is often now described as the largest tax haven in the world, and it acts as the largest centre of the global tax avoidance system. An estimated 50% of the world’s trade passes through tax havens, and the City acts as a huge funnel for much of this money.
So what should our response be? Many always argue that tax avoidance is an incredibly difficult subject, and one that requires the combined efforts of corporations, politicians, lawyers, journalists and academics to properly get to the bottom of. And that’s true… but it’s also true that there seems to be a glaringly simple solution that would bring far more tax justice to everyone…
Companies should pay tax on the profits they make in the countries where they are operating. Simple.
Yes, there are complications to be worked out, in terms of what rate of tax, e.g. what percentage should be paid on copper being extracted in Zambia, when the profit is mainly made by selling mobile phones in Europe. But the principle remains. Companies should pay tax on the profits they make, in the countries where they are operating.
Pray that the City of London would become more transparent, especially with regard to the financial institutions based here, and their relationships with off-shore tax havens. Pray for clarity to emerge and a greater awareness amongst the general public on the issues of corporate tax avoidance. And pray for a global financial system where companies pay tax on the profits they make, in the countries where they are operating.
Mark Williamson also blogs regularly at One Rock International, a training organisation resourcing missionary leaders across the globe. He’s passionate about good films, good food, getting into deep conversations, and going for long walks with his wife Joanna.