At the heart of the Tax Justice Together Project is the problem of tax avoidance. Every year $160bn is shifted out of developing countries and into ‘tax havens’, which are countries (geographical locations) who set very low corporate tax rates in order to attract business. When a company uses tax loopholes to move its profits out of the country in which it was generated, it prevents that country from collecting tax that could otherwise tackle poverty and inequality, and pay for basic life-saving services such as healthcare and education.
Our project is about increasing critical understanding and active engagement, alongside campaigners in the global south, in pan-European efforts towards progressive and fair reform of global tax policies. We have identified key structural problems in the current tax system and aim to affect policy change on a global, international and national level.
What are the problems we want to address and the changes we want to see?
International tax system
The global tax system is biased towards the interests of rich countries and is set up so that multinational companies can slash their tax bills by exploiting tax loopholes. A fair tax system can only be developed if all countries involved are at the table and have equal say in what their taxing rights are. Currently, four fifths of the world’s countries are not represented in such negotiations, whilst big business has a disproportionate influence on the process.
Global - The European Union and EU members’ states support the establishment of a global forum for inclusive and fair negotiations on international corporate tax reform.
One of the key principles of tax havens is that they offer confidentiality – this means profits in tax havens are hidden profits – they are ‘offshore’. Corporate secrecy facilitates tax avoidance, as it allows multinational companies to shift profits between subsidiaries without scrutiny. Requiring multinational companies to publicly report key economic data such as sales, turnover, employment and profit on a country by country basis would give developing country tax authorities and civil society groups a powerful tool to identify where profit shifting and tax avoidance may be occurring.
Pan-European – The introduction of Country by Country Reporting (CBCR) and more transparent accounting rules that oblige large companies in any sector to publish key financial information which would help ensure tax authorities can act to make sure large companies pay their fair share.
When a company makes profit in one country and moves it to a subsidiary in another, it pays tax on the transaction. Tax treaties were originally designed to prevent double taxation whereby the same income is taxed in both the country form which it came, and the country in which it ends up - they are used to reduce a country’s capacity to tax a financial flow. However, the problem often faced by developing countries, is that when the treaty is signed it contains more favourable taxing rights for the rich country and leaves the poorer country with reduced capacity to tax the transaction. Tax treaties are being used as a tool to lower taxation on cross-border transactions and therefore keep an unfair share of profits.
National – The climate around tax is different in each of the 19 countries in which we are working. Our partners will work on any national policy change that will contribute towards the specific project objective, such as the push for EU member states to shift the taxing rights to countries in the global south through the reform of tax treaties.
Who are we and what will our approach be?
Tax Justice Together is made up of 24 Partners representing ActionAid and Oxfam families as well as 8 other European and Latin-American NGOs all committed to finding exciting and engaging ways to get citizens in Europe and Global South talking about tax, and taking action to demand a fairer system. In addition to national campaigns contributing to our overall objectives, we will also be organising joint activities across four main areas: communication, training, mobilisation and influencing. Some of the most exciting activities include Campaigner’s Conferences, Inter-rail tour, Blog Action Day, joint media stunts, training and many events in 19 countries including film screenings, talks, tax tours and street actions.
Global Tax Body welcomes Financing for Development negotiators (Eurodad: Global Week of Action)
Our vision on development aid in 3 questions
Why should we care about development aid?
Development aid is a crucial stream of funding for the world’s poorest communities. For some it is a lifeline against a back drop of corporate tax avoidance that prevents countries from collecting the tax revenue needed to provide basic services that we in Western societies take for granted. By acknowledging the interconnectedness as well as structural problems of the global economic order, it is our responsibility to address the issues, which prevent countries in the Global South from sustainable development and ensuring economic, social and human rights for all.
What is the added value of the EU as a global player?
The EU and its member states are the largest donors of development aid in the world, and yet developing countries loose $160bn every year. 2015 is the Year for Development which provides an opportunity for the EU and its member states to lead on promoting fair and equitable tax reform as a driver for inclusive and sustainable growth, reducing poverty and inequality, and promoting fairer relations between developed and developing countries, in the context of the post-Millennium Development Goals consensus.
How can each of us make a difference?
It is our individual responsibility to recognise and use the voice of civil society to influence change. We are not citizens only on Election Day, but can and should use our voice to keep decision-makers as well as global corporations accountable every day. Being aware of the injustice many of the world communities experience on daily basis is the beginning of change. Through understanding the inter-relations between the developed and developing countries, and by taking joint actions, holding decision-makers accountable on a national, European and global level, we can drive change forward.