THE world is in turmoil. Financial markets are tetchy at the prospect of countries such as Spain, Italy, and Greece failing to repay their loans, while popular dissatisfaction with austerity has triggered rioting from Athens to Ealing. In East Africa, a combination of extreme poverty, drought, fighting, and international neglect has led to a famine.
At times of crisis, the Churches are challenged to be a guiding light, offering a moral compass, speaking truth to power, and proving the kind of prophetic voice that our world needs. In 2000, they played a crucial part in ensuring that the poorest countries’ multi-billion pounds’ worth of debts were cancelled. The Christian message of jubilee, initially seen by those in power as ludicrous, became a reality when a large movement of people supported it.
The amount of debt cancelled would have taken an organisation such as Christian Aid more than 1000 years to raise. Campaigning works.
A decade on, developing countries face new challenges, which we must help equip them to meet. One is tax-dodging, which Christian Aid estimates costs them some $160 billion a year. Although some have questioned this huge figure, even the Organisation for Economic Co-operation and Development (OECD) has said that the problem is likely to cost poor countries more than they get in aid — some $120 billion a year.
As in the UK, this financial haemorrhaging hits basic services such as schools and hospitals — and the infrastructure that will attract investment and jobs. It also exacerbates poor countries’ dependence on aid and unsustainable debt.
I AM aware that a previous article in the Church Times (“Corporate tax-dodgers will soon be on the run”, Comment, 25 March) generated a lively debate on the Letters page. One correspondent complained that Christian Aid had become a “political organisation rather than a charity”. In order to tackle poverty, however, we have to challenge the political structures that keep people poor.
Part of the reason why tax-dodging takes place on such a vast scale is, of course, that revenue authorities in each country are often weak and fail to collect the taxes that they should. The OECD will report to the G20 next month that more needs to be done to build up the capacity of revenue authorities to operate effectively. But that is only one side of the problem.
The other side is the lack of accountability in agreements with, and the operations of, multinational corporations and the taxes they pay. This secrecy gives unscrupulous companies and individuals the cover they need to get away with it.
Two forms of secrecy are especially troubling from the point of view of tax justice. The first is around the finances of multinational companies, some of which use accounting sleight-of-hand to shift artificially their profits out of the countries where they are truly owed, and into tax havens where secrecy is intense.
The other form of financial secrecy that especially worries campaigners for tax justice is the cover offered by tax havens. At present, it allows individuals and firms to hide terrifyingly large sums out of tax authorities’ reach. It also helps corrupt politicians and officials to hide bribes and to steal billions from public funds, safe in the knowledge that their crimes are unlikely ever to be detected. Tax havens contribute to looting on a global scale.
One current example is Switzerland, whose banks boast of the “privacy” and “confidentiality” they offer. UK citizens alone have hidden so many billions in Swiss banks’ shadowy vaults that the UK Government has recently negotiated a deal under which it will start getting tax on British people’s money via the Swiss government, even while it remains ignorant of their identities.
The deal will produce tax revenue for the UK Treasury, but will harm developing countries. They, too, lose billions to tax havens, but lack the power to make similar deals. What they need is a more global system of financial information-sharing, which would make it far harder to hide money offshore. But when rich countries, such as the UK, do cosy deals with tax havens such as Switzerland, they reduce the pressure for a more international solution.
TO TACKLE corporate financial secrecy, tax-justice experts want Governments to require multinational firms to reveal more about their finances. Specifically, they are calling for the introduction of country-by-country accounting, under which companies report data such as the profits they make and the taxes they pay separately for every country in which they operate. This would make it harder for companies to shift profits out of the countries where they are truly owed.
Two particular opportunities for progress stand out. The European Union is debating the possible introduction of country-by-country accounting, which would be a magnificent step forward. It is vital, however, that decision-makers get the details right. While some favour legislation along the lines of the Dodd-Frank Act, in the United States, for instance, that would fail to bite on the abusive profit-shifting that is such a problem for developing countries.
In November, meanwhile, leaders of the G20 countries will meet in Cannes to discuss the global economy. This is a unique chance for the Churches to lend their voices to the campaign for more openness from companies and tax havens, so that developing countries have the information they need to challenge tax-dodgers.
Like the Jubilee debt campaign, the Churches can play a part in challenging the structures that keep people poor. The Church of Scotland, and the Baptist and the Methodist Churches have all lent their voice to the campaign. Now the Church of England has an opportunity to do the same.
We pray daily for God’s Kingdom to come on earth, as it is in Heaven. Here is a very practical way of enabling that peace and justice to advance into millions of lives, and into the structures through which our common life needs to work.
Dr Redfern is the Bishop of Derby.
Dr Redfern is the Bishop of Derby.