Corporate tax breaks cost poor nations $138 billion a year-report

by Luke Balleny | | Thomson Reuters Foundation
Thursday, 4 July 2013 17:13 GMT

Mothers with their babies at a ward of Jose Fabella maternity hospital in Manila. There are around 300 mothers on the ward at one time with 75-100 babies born every 24 hours. Picture September 12, 2012. REUTERS/Erik De Castro

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Developing countries give huge tax breaks to foreign companies which would invest without such incentives, and this deprives their citizens of education, healthcare and other vital services

LONDON (Thomson Reuters Foundation) – Developing countries could send every child to school, meet all the health-related Millennium Development Goals and have money left over if they cancelled tax incentives for big multinational corporations, according to a new report by campaign group ActionAid.

The report entitled “Give us a break: How big companies are getting tax-free deals,” estimates that developing countries lose more than $138 billion a year of government revenue through corporate tax exemptions alone.

“Big companies are doing deals to avoid paying tax on their massive profits. They’re playing developing countries off against each other to get good tax deals for them, but bad deals for the world’s poor,” ActionAid’s advocacy manager Soren Ambrose said in a statement on Thursday.

The report cited the World Bank’s Investor Motivation Survey for the East African Community, in which 93 percent of investors said they would have invested anyway, even if tax incentives had not been on offer.

In a ranking of investor motivations, tax incentives came 17th, behind factors including exchange rates, labour costs and transport infrastructure, the World Bank survey said.

“Governments aren’t collecting the tax which is rightfully theirs. They’re openly letting big companies pay less tax,” Ambrose said. “Some countries are even offering completely tax-free deals – a lose-lose for all involved, especially poor people in urgent need of services like schools and hospitals.”

“In the long run, governments and companies are sabotaging the development of the skilled and healthy workforces that could lift their countries out of poverty,” he said.

Developing countries in East Asia and the Pacific region lost more revenue because of corporate tax exemptions than any other region, an estimated annual loss of $55.1 billion, ActionAid’s report said. Latin America and the Caribbean missed out on an estimated $33.2 billion a year while sub-Saharan Africa lost an estimated $7.6 billion a year, the report added.


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