Ending tax breaks on corporate profits could send all children to school with change to spare, ActionAid research reveals

London/Johannesburg

Tax breaks on big companies’ profits cost developing countries over US$138 billion in tax every year globally – money which could be used to improve public services such as health and education in poor countries, according to new ActionAid research.

The research, ‘Give us a break – How big companies are getting tax-free deals’, reveals that the tax breaks given by developing countries to big companies could put the 57 million children who currently don’t go to primary school, into the classroom with enough cash left over to meet international targets on basic health care provision and provide agricultural investment needed to end hunger.

Soren Ambrose, ActionAid Advocacy Manager, says: “Big companies are doing deals to avoid paying tax on their massive profits. They’re playing developing countries off against each other to get good tax deals for them, but bad deals for the world’s poor”.

In an attempt to attract foreign investment, governments are competing to offer lower tax rates than their neighbours.

“Governments aren’t collecting the tax which is rightfully theirs. They’re openly letting big companies pay less tax.”

“Some countries are even offering completely tax free deals – a lose-lose for all involved, especially poor people in urgent need of services like schools and hospitals. In the long run, governments and companies are sabotaging the development of the skilled and healthy workforces that could lift their countries out of poverty” said Ambrose.

An ActionAid investigation earlier this year found that British controlled company Zambia Sugar took the Zambian Government to court to win the right to benefit from a tax break that reduced its corporate income tax rate from 35% to 15% (since 2013, 10%), an estimated loss to the Zambian Government of US$3.6 million per year in future years.

ActionAid is calling for an end to harmful tax breaks and increased cooperation between governments to prevent tax competition which leads to a ‘race to the bottom’.

This new research is part of a new ActionAid campaign called Tax Power, launching across more than 20 countries. In addition to an end to harmful tax breaks, it is calling for an end to tax havens and an increase in tax transparency.

For more on ActionAid’s Tax Power campaign visit: http://www.actionaid.org/tax


Editors’ notes

Download the briefing at http://act.ai/giveusabreak

ActionAid is a global movement of people working together to achieve greater human rights for all and defeat poverty. We believe people in poverty have the power within them to create change for themselves, their families and communities. ActionAid is a catalyst for that change.