Death and tax havens

Death and taxes are an ugly old couple with no friends. And if this man is right, soon, as John Donne predicted, death, thou shalt die.

That leaves taxes. But not only do some people not want them to die, they want them to grow vigorous and flourish. Why?

Writing in The Guardian in November 2008, OECD Secretary-General Angel Gurria pointed out that developing countries lose to tax havens almost three times what they get from developed countries in aid.

Gurria was echoing the sentiment that developing countries have many of the means they need to combat poverty and promote development, but these means are being stolen by unscrupulous companies and individuals.

According to the UN, the cross-border flow of the global proceeds from tax evasion, criminal activities and corruption totals $1-1.6 trillion per year, half from developing and transitional economies.

sums being lost to tax evasion could save the lives of 350,000 children each year

Christian Aid estimates that the sums being lost to tax evasion could save the lives of 350,000 children each year if made available to programmes fighting poverty and disease.

Not just taxes are being seen in a new, more positive light. It’s now being argued that the tax collector, eternal pariah, has a noble role to play.

South Africa’s Finance Minister Trevor Manuel told the OECD Global Forum on Taxation  that “it is a contradiction to support increased development assistance, yet turn a blind eye to actions by multinationals and others that undermine the tax base of a developing country.”

As Manuel pointed out, smaller, poorer countries with less sophisticated tax administrations are often ill-equipped to dismantle the complex structures put in place to minimise tax. He urged the OECD to help identify and diffuse best practices and mechanisms to assist and build stronger tax administrations.

Will anything be done about it? On January 27th at OECD headquarters, tax experts and development experts established a joint taskforce, stating that “We have a common understanding of the central role taxation plays in development and poverty reduction: a strong tax system is the heart of a country’s financial independence, its revenues are the lifeblood of the state itself.”

Over the coming months, we’ll see what actions follow. Governments in the developed countries will be under pressure to make taxes fairer. Especially following the bailouts and other costs of the crisis, citizens of OECD countries suffer too, in terms of higher taxes to make up for the shortfall or poorer public services due to under-financing.

Useful links

OECD Centre for Tax Policy
Global Forum on Transparency and Exchange of Information for Tax Purposes
Tax Justice Network resources page on aid, tax and development

Patrick Love

2 comments to “Death and tax havens”

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  1. tony genco - 15/02/2010 Reply

    Sustainable Development must be key to our success

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