A structural change in the way we do business in developing countries is needed. There’s more to CSR than child labour and green energy. Tax avoidance is definitely also an important concern.
Tax avoidance isn’t simply an issue of governments collecting more or less money. It’s a problem for development. Tax avoidance occurs when companies exploit loopholes and flaws in tax laws in order to pay the least amount of taxes. For this reason, the NGO Action Aid launched a campaign on the use of tax havens by beer giant SABMiller at the end of 2010.
According to ActionAid, the UK-based brewer SABMiller, owner of brands such as Grolsch, is avoiding an estimated £20m of taxes in Africa and India every year. This is enough money to educate a quarter of a million children in Africa. Although this aggressive approach to tax planning that has been taken by companies like SABMiller is legal, simply complying with tax laws isn’t the same as taking a responsible attitude towards paying tax dues.
Taking action against tax havens is critical, because money moves across the world in a flash these days, from producing countries through tax havens and onward to a company’s head office. Take the humble banana, which travels by boat straight from Ecuador to the EU. On paper, this banana’s voyage is different indeed. Products are sent virtually through letterbox companies in fiscal paradises such as the Bahamas. In this way, a fruit company can avoid up to 25% of the taxes that were rightfully due in the country of production.
In 2008, the G20 stated the ambition of promoting transparency around taxation policies. That will benefit tax yields in the western countries, but is at least as important for the developing world. The west spends $120bn on development aid yearly. Yet, the developing countries miss out on at least $284bn in tax yields due to the fiscal loopholes that businesses, mainly western ones, tend to exploit.
While the G20 is making progress in its fight against tax havens, even a major policy breakthrough wouldn’t be enough help for the poorer countries. The international bodies involved don’t yet have enough authority to counter the wily ways in which large companies avoid paying their taxes.
As we wait for sufficient legislation to be implemented, businesses should start taking the lead by refraining from dishonest fiscal practices. If a consultant advises a company to ‘go public in the Cayman Islands’ in order to lessen its tax burden, one can simply say ‘no thanks’. That’s just as much taking the ethical option as making sure that your product isn’t associated with child labour is.
Corporate social responsibility goes beyond just looking at environmental and labour issues. A decent attitude towards paying one’s tax dues is also part of it. I would call on all CEOs and CFOs to not go in for dishonest fiscal setups for the simple reason that taxes are due where the money is earned, not elsewhere. Seems only natural, doesn’t it?
Emma Herman is spokesperson for Fairfood International and sits on the supervisory board of Humanity in Action.
© FoodBev Media Ltd 2020
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