The Path to Positive Tax Behaviour for Businesses

Tuesday, November 17, 2015 - 10:56

I was at the G20 yesterday. Our main message to the leaders coming together in Antalya, Turkey, was this:

If world leaders do not come together to fix the broken tax system, developing countries will continue to lose out on free healthcare, education and essential public services; and global inequality will continue to rise.

Poor countries need tax income to fulfil human rights. Today, they lose 200 billion dollars a year in tax avoidance, and are excluded from the bodies that make international rules on tax. That means poor countries have no real say in the rules that affect their lives and push people deeper into poverty. To fix the broken system, a major challenge of this century, developing and developed countries need to work together.

The G20 has failed once again to commit to widening the scope, ambition and inclusivity of the global tax reform agenda. Doing so would notably require more multilateral initiatives through the United Nations, such as a UN tax body. But when South Africa and Brazil, along with the rest of the G77, demanded just that at a UN conference in July, they met a brick wall in the shape of the rich countries that want to preserve the status quo.

But rich countries won’t be able to resist for ever. We need to change the rules on tax because a peaceful and wealthy society cannot be built on inequality and injustice. These reforms are needed urgently for the people living in poverty across the globe who risk seeing another generation deprived of their basic human rights, and further erosion of social bonds through rising inequalities.

It is because it is urgent that I’m here in Geneva for the UN Forum on Business & Human Rights, travelling directly from Antalya. I’m here to say that companies shouldn’t passively wait for regulatory change, because there are actions that they themselves can and should take to become more responsible. It is in business’s clear interest to contribute to healthier societies; we just need some concrete actions to confirm that fact.

We believe that this requires companies going above and beyond legal compliance, because the system as it stands allows companies to pay less tax at the expense of millions of the world’s poorest. All businesses have a responsibility to respect human rights. And since companies’ tax behaviour has an impact on individual human rights, tax is part of that responsibility. Tax is not just an operating cost to be minimized. It’s also an investment in society and long term business success.

I’m telling the more than 2,000 people gathered in Geneva that responsible corporate tax includes increased transparency: be clear about tax payments made in each jurisdiction where a company operates. And it means publicly justifying tax-planning choices against the reality of corporate operations, and paying a fair share where you get your materials and labour, and make profits. It means companies no longer using their economic or political power to obtain secretive or preferential tax treatment. And crucially, it means companies being conscious of the impact of their tax behaviour on development and human rights in the places where they do business.

Imposing binding rules on corporations and making sure they don’t capture decision-making processes is part of ActionAid’s agenda. And we are eager to engage with businesses that want to be on the right side of history, leading the journey towards responsible tax behaviour. Together we can put companies on the path to positive tax behaviour and full respect for human rights.

ActionAid, ChristianAid and Oxfam released today guidelines for responsible corporate tax behaviour.