* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Tax dodging by multinational companies is depriving developing countries of an estimated $200bn a year
Education is widely recognised as a key to escaping poverty and many countries including Mozambique include the right to education in the constitution. But 15 years on from the setting of the Millennium Development Goal of universal primary education a staggering 57 million children are missing out on an education worldwide.
Some progress has been made in Mozambique including a reduction in the teacher-student ratio (albeit from 73 pupils per teacher in 2007 to a still high 63 per teacher in 2012), increased investment in teacher training, free primary education and free books for primary students. But seven million of the 12 million children in Mozambique are still not in school - and the lack of money available for the government to invest in education is the major factor.
As world leaders gather in New York there is a risk that they will pledge to achieve ambitious new Sustainable Development Goals without sufficient clarity on how these will be financed.
This is particularly true for the achievement of the goal on education which ambitiously extends to include pre-primary, upper secondary education and indeed lifelong learning. Quite rightly this goal also stresses that the quality of education is fundamental.
Initial estimates suggest that, even without addressing upper secondary education, governments in low income countries will need to increase their spending by 50% - and aid donors will need to fill the remaining $39 billion a year required. Raising that much in aid to education, whilst desirable, is largely unimaginable given the present economic situation.
Many low income countries already fall significantly short of the international benchmarks of good practice that suggest governments should spend 20% of national budgets on education. Indeed, 35 countries spend less than 20% of their budget on education and shockingly some countries – Democratic Republic of Congo, Eritrea, Nigeria, Pakistan and Zimbabwe - spend under 10%.
How will these countries and other low-income countries generate the extra money needed to fulfil the new goal?
In some countries aid will play an important role in the short term but as we set goals for achievement in 2030 we need longer term thinking. National governments need to be in the driving seat and the only credible way to finance national development in the long term is through ensuring that more money is raised nationally through tax and that the revenue raised is effectively spent.
Tax dodging by multinational companies is depriving developing countries of an estimated $200bn a year - more than they receive in aid. This is money that could not only pay for schools, teachers and improving the quality of education, but also hospitals and the other essential public services that will help eradicate poverty and tackle hunger.
Research published by ActionAid in July found that in Malawi, the world’s poorest country according to the World Bank, one Australian mining company, Paladin managed to cut its tax bill by US$43 million over six years. This money could have paid for the salaries of 39,000 teachers for one year.
In Tanzania, the Global Campaign for Education observed that the amount lost to tax dodging by big companies could pay for the training of all Tanzania’s untrained primary school teachers, as well as training and salaries for more than 70,000 additional teachers and building 97,000 new classrooms and ensuring every primary school-aged child has a reading and mathematics text book.
Since the introduction of tax incentives in Mozambique in 2009, multinationals companies have contributed only 2% of the national tax revenue while individuals and small companies contribute the remainder. Between 2002 and 2011 Mozambique lost more than US$5.27 billion in just one form of tax dodging known as trade mis-invoicing – money that could have been spent on education and transforming the lives of millions of children.
It is clear that increased tax revenue alone is not enough – we also need to ensure that such revenue is progressively and sensitively spent on education and other priority goals – and we need to ensure there is independent scrutiny to prevent misuse of resources.
But it is equally clear that without taking action on tax, the new development goals will remain just pipe dreams. Tax dodging is largely made possible due to the current global tax rules which are determined almost exclusively by the rich and powerful nations of the OECD, with no regard for developing countries.
Key to changing the global system is the establishment of a UN global tax body, where every country would have the right to participate equally in determining the global tax rules. However, many of the world’s richest countries oppose this proposed change and refuse to give developing countries an equal say.
Stopping tax dodging is critical to generating the money needed to ensure that millions more children in Mozambique and elsewhere have access to a good, quality education and to the implementation of the other new goals to end poverty. This should be the focus of everyone’s attention this week in New York.
*Amade Suca is country director of ActionAid Mozambique
