Tax and Aid (6)

There is little doubt that governments will have to play a major role in alleviating the world’s problems, from climate change to famine. Of course, nonprofits, foundations, and more recently, social enterprises are also major players. However, all of these organizations depend on world governments, be it funding, other forms of financial support, or policy, to survive and succeed. Social enterprises in particular, being businesses, need government support in the form of laws and policies to survive in an open market. Richard Brooks, in his article, Tax and aid: To trade with loaded dice, from November 29^th in the Guardian, discusses how large multinational corporations can inhibit governments, particularly those of very poor countries, from making a significant impact on these social issues.

He uses SABMiller as an example to highlight multinational tax avoidance, especially in poor countries: The SABMiller brewery located in Ghana only paid 0.3% of its revenue back as tax from 2007 to 2010. The company is using loopholes in local and international laws and creative financing arrangements to avoid paying taxes. In the country, corporate taxes form a significant amount of revenue for the government. Obviously, by avoiding these taxes, SABMiller is creating a significant negative effect on the governments operating income. Such tax avoidance is repeated by other multinationals throughout the world in both developing as well as developed countries. Obviously, this could be a huge source of revenue for governments, who could put the money to good use in helping their people. Specifically for poor nations, this would allow them to reply less on foreign aid, which considering the current economic climate and budget tightening, is likely to decrease.

In terms of social enterprise, money lost from tax avoidance could actually go to promoting social businesses whether it is direct funding, or other financial support mechanisms. Obviously, intelligent policies and laws are still needed, but closing tax loopholes and preventing the offshoring of funds could promote assistance to social enterprises and social causes in general. All that is needed is the political will, which sadly, is really lacking. Do you think political will and capital could be generated if there was more of a focus towards tax avoidance being a social issue? At the moment, it is described by opponents as a way to expand government, and by proponents as the corporate world being negligent. Additionally, do you think poor governments could go about collecting taxes without scaring off these businesses, without help from developed nations (where it seems there is a lack of political will)?