Tax came of age in 2013. No longer the preserve of accountants, it won the attention of governments, parliaments, journalists, campaigners and voters who, according to one recent British poll, are more concerned about tax avoidance than any other aspect of companies’ behavior.
With so much focus on how rich people and companies dodge their fair share – and with many societies struggling with austerity – it’s hardly surprising the international apparatus of tax evasion and avoidance is starting to look threatened.
This year has seen so many breakthroughs that one risk, for those who believe tax justice will change the world, may be complacency. We are still only at the start of a much longer battle about the distribution of power within societies and between countries. We cannot expect the companies and individuals who have gained trillions through cheating the rest of us to let go without a fight.
But with that warning about the need to keep pushing against tax dodging and the financial secrecy that sustains it, here are the four highlights of progress towards tax justice in 2013.
First, after countless exposes of multinationals such as Starbucks and Google, which pay little tax in countries where they do brisk business, G8 and G20 governments agreed to investigate how to tackle such obvious unfairness. The rich countries’ club, the OECD, is leading the work, which is supposed to create rules that benefit poor as well as wealthy nations – although the former will have to fight for it.
Since poor countries lose about $160bn a year to tax dodging by multinationals, the likes of Christian Aid, ActionAid, Oxfam, Tax Justice Network and the Global Alliance for Tax Justice are campaigning for developing countries to have a voice, and for OECD member states to take that voice seriously.
A second highlight was the G8 and G20 also agreeing that multinational companies must reveal more about their finances, by reporting them on a country-by-country basis. This will help tax authorities identify which firms should be further investigated.
Campaigners now have to push for some governments – including the UK’s – to accept that these reports should be public, so that everyone with an interest can know more about the companies’ tax practices in every country where they operate.
A European Union decision this year requiring banks to report on a country-by-country basis should inspire future progress: the same rules should be extended as soon as possible to all industries.
A third highlight has been that some governments acknowledged the dangers of allowing people to hide their identity and money behind shell companies, so distancing themselves from crimes such as tax evasion and corruption.
In October, plans were announced for a public UK register of the real owners of 3m British companies. The next step is to ensure that others, including UK tax havens such as the British Virgin Islands, do the same. We also need to know who and what lies behind trusts and foundations. So far, most governments seem reluctant to tackle the menace of secret ownership.
Finally, there has been progress towards greater sharing of tax information between countries. A growing number of tax havens – including Singapore, Luxembourg, Bermuda and the Cayman Islands – have agreed to start sharing information about who has money in their banks, by signing the existing international convention, although some UK tax havens have done so with a forest of reservations. This should help governments, including those of poor countries, to catch up with people who hide dirty money “offshore”.
Building on this, the G8 and G20 countries have finally agreed to work towards automatic information sharing between countries. The “automatic” part means governments can obtain information much more easily than at present. Again, the task now is to ensure that the new system works for all countries from the outset, not just for the rich.
This is an impressive list of advances, which few would have dared forecast even a year ago. It holds great promise for people living in poverty across the world. But what happened in 2013 is just the end of the beginning.
In 2014 and for many years beyond, tax and transparency campaigners will need to keep the pressure on governments, simply to ensure that they do what they have already agreed to – in the face of well-funded, sustained opposition.
There are also other problems, such as the tax incentives through which governments give away billions to companies every year, in the hope of attracting foreign investment. Governments need to realize that the unsustainable paradigm of tax competition has created a race to the bottom, in which most of us are losers and all the benefits accrue to multinationals.
I am hopeful about tax justice in 2014. Campaigners are increasingly working together. For example, this year saw the formation of the Global Alliance for Tax Justice, an alliance of tax justice campaigners from different countries and regions.
Developing countries’ governments are also increasingly interested in the potential of tax to fund their public services and reduce their reliance on unreliable aid flows – and there are many other dedicated politicians and journalists across the world making the case for tax fairness.
What unites us all are the passion and energy that come from knowing about an injustice that we can and must put right.
• Alex Prats is principal economic justice adviser at Christian Aid