Fairer tax through transparent reporting

Joanna Spratt

Advocacy and Campaigns Director

Oxfam New Zealand

Wherever we live in this world, we all need the same things – a safe home to live in, nutritious food to eat, clean water to drink, and the knowledge and skills to help our communities flourish. What is crucial for meeting these everyday human needs are transparent and fair global tax systems.

Tax avoidance

In a recent 2019 paper on corporate taxation in the global economy, the International Monetary Fund (IMF) shows that in 2013 alone, tax revenue losses from multinational corporation tax avoidance, totalled approximately:

  • US$450 billion for Organisation for Economic Co-operation and Development (OECD) member countries.
  • US$100 billion for non-OECD countries.

This is money that is owed to governments so that they can invest in meeting the needs of their people, providing the nurses, teachers, roads, police and rubbish collection that help to reduce and prevent poverty and inequality.

Developing countries in particular rely heavily on corporate taxation for government revenue. The IMF estimates that:

  • corporate income tax makes up an average 16 percent of government revenues for low and middle-income countries, compared to
  • an average 8 percent in high income countries.

Stopping multinational corporate tax avoidance (and evasion) is, therefore, an important tool for fixing our unfair, global economic machine, and helping to lift countries and their people out of poverty.

Improved financial transparency

One way to stop tax avoidance is to require multinational corporations to be more transparent about their finances. Public country-by-country reporting (pCBCR) puts the onus on multinational corporations to place basic financial information in the public realm. This then allows academics, journalists, civil society and governments to access the information, to assess whether or not they are paying their fair share of taxes.

Because multinational corporations operate across multiple countries, this information must be broken down country-by-country. Only then can any moving of profits to secretive, low/no tax jurisdictions be revealed.

PCBCR has been required of European-based multinational banks since 2015. Also several countries including Canada and Norway, require extractive industries (mining, oil, gas and logging) to publish these reports. Research into the European regime shows that pCBCR increased the effective tax rate of banks, which indicates they reduced their tax avoidance practices (Overesch & Wolff, 2019).

Other research shows that there was no negative impact on business competitiveness due to the pCBCR requirements, refer Transparency International Europe, 2016. Investors too, favour pCBCR because it helps them to assess risk and make wiser investments.

Call to action

In its Fair Tax Now campaign, Oxfam is asking the New Zealand government to legislate for pCBCR. Greater transparency will be a brake on tax avoidance and help developing countries which could not otherwise access the information easily.

Add your voice now to the petition and visit your MP to talk to them about this issue.