The International Aid Debate – Are tax reforms the answer?
By. Penelope Maclachlan
There’s many a slip between cup and lip summarises what can go wrong if richer countries try to help poorer ones through aid alone. Maladministration and corruption can occur anywhere along the supply line. If the recipient is torn apart by natural or manmade disasters – tsunamis or civil war, for example – the likelihood multiplies of thieves snatching for themselves what was meant for victims.
A more effective way of helping the world’s poorest people is to tax businesses operating in poor countries. Financial leaders must make clear the use that governments will make of revenue collected. Building a dictator’s seventh palace is misuse of tax. Appropriate use includes health, education and infrastructure. Every country should progress until it no longer needs foreign aid, but is self-sufficient. Bernard Shaw said that benevolent people loathe alms-giving; no one, individual or nation, should need charity.
The G8, comprising Canada, France, Germany, Italy, Japan, Russia, USA and the UK, recognises this. Since 1 January 2013 the UK has been president of the G8. Earlier this year George Osborne, Chancellor of the Exchequer, presented to the Group policies on tax evasion and ways to help poorer countries collect taxes due to them. Osborne said that the UK had helped Ethiopia increase tax collection, and he claimed the UK had also helped Kenya and Ghana. In February 2013, Group of 20 finance chiefs engaged in talks in Moscow with a pledge to stop multinational companies moving profits to low-tax countries.
Tax has acquired a bad name which it does not deserve. When citizens pay taxes they should feel confident that the revenue will go towards what they need for themselves and their families and friends, and the prosperity of their country. They should also understand that we must pay a fair price for imports such as chocolate and coffee. Without the growers in Africa, the UK would lack these commodities.
Aid does nothing towards preventing tax evasion, or recovering misappropriated funds. Tax reforms enshrined in international law are overdue. David Cameron at the World Economic Forum in Davos (The Guardian, 24 January 2013) took a swipe at Starbucks for paying £8.6m corporation tax in the UK over the past 14 years – a fraction of what it owed. Starbucks’ promise to pay £20m over two years is controversial. Paying tax is not a matter of promise but a legal obligation. Tax reforms may be the answer but as yet governments lack ways of enforcing them.