According to recent figures from the World Bank, my country Malawi is the poorest country in the world. People here live to an average age of 55 and there are high rates of Aids/HIV infection. Our health service is threadbare, with a great shortage of nurses and doctors and our schools need teachers. The country desperately requires investment in public services, including health and education programmes.

However, this does not mean there is no hope. Far from it. One of the solutions to this problem is to increase government income through taxation. Although Malawi is poor, the country has natural resources that are hugely valuable. In theory, by allowing large companies to mine these resources and then tax those operations, our government could raise millions of dollars of revenue.

But this can only happen once the twin problems of tax avoidance and unnecessary tax incentives are solved. And there seems little sign of this.

ActionAid recently released a new report – called An Extractive Affair – revealing that the Malawian government lost out on more than $43m (£27m) in potential tax revenues from a single Australian uranium mining company in six years. That is enough money to pay the salaries of 39,000 teachers or 8,500 doctors for a year.

The company, Paladin, was able to do this by negotiating millions of dollars in tax incentives from the government. In addition it avoided paying millions more in tax in Malawi by using complex corporate structures to exploit loopholes in the international tax system, routing payments through the Netherlands.

Greg Walker, Paladin’s general manager for Malawi, disagreed with our conclusions, arguing that the basis of Action Aid’s argument – the assumption that Paladin would have invested in Malawi if a 5% royalty had been in place – is unsound. Walker says that unless the royalty had been reduced to 3% – “the average royalty rate in Africa at the time,” he says – the project would not have passed Paladin’s economic threshold for investment. “As a result Malawi has enjoyed the economic benefits arising from this very significant investment,” Walker says.

But I would argue that this is not the point. Paladin was able to do this because the international tax system let it. What happened was perfectly legal. In fact, tax breaks and tax planning are fairly typical ways companies minimise their tax bills in poor developing countries. In Paladin’s case it was permitted to do so by Malawian and international tax laws.



For this reason, we want the Malawian government and governments in other developing countries not to offer this kind of massive tax break to companies. We also want global tax rules to be much tougher to prevent this kind of behaviour.

One of the key anti-tax dodging proposals on the international table tax is from the Organisation of Economic Co-operation and Development. It has launched a base erosion and profit shifting (BEPS) action plan, and has billed it as an answer to tackling tax avoidance in both rich and poor countries.

But this would do nothing to stop what happened with Paladin in Malawi. The process does not deal with either tax breaks or the balance of taxing rights between rich and poor countries, enforced by the global spider’s web of tax treaties. Instead, it will allow business to go on as usual.

Moreover, Malawi never got a say on how this process is shaping global tax rules. Instead the system was created by 40 something of the world’s richest countries, who are represented on the OECD and G20, while poorer countries were merely consulted. Far better represented are the interests of the multinational companies headquartered in OECD nations.

But there are still green shoots.This month all the world’s governments are meeting in Addis Ababa to agree on how to finance the fight against poverty, and developing countries are pushing hard for them to be given a say in writing global tax rules, potentially through a tax body at the UN. This summit is a rare and crucial opportunity to reshape the international tax system – although many of the world’s richer countries are opposing change and there’s a risk the developing countries may stop pushing.

As a citizen of the poorest country in the world, I really hope that the world does grab this unique opportunity. From Malawi, I say that change is urgently needed.

Next week the Guardian’s Global Development Professionals Network and ActionAid will co-hosti a panel discussion about the impact of tax competition on developing countries; Siobhan Kennedy, Channel 4’s business editor will chair a panel that includes Chris Morgan, head of tax policy, KPMG in the UK, Belema Obuoforibo, director of the Knowledge Centre at the International Bureau for Fiscal Documentation, Netherlands, and Diarmid O’Sullivan, tax justice policy adviser, ActionAid. We look forward to seeing you there; for more information and tickets click here.

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