World Economic Forum debate hears how fight to make companies ‘pay their fair share’ is being undermined by race to cut corporation tax rates

This article is more than 3 years old

This article is more than 3 years old

Efforts to tackle global tax avoidance are being undermined by a “race to the bottom” on corporate tax rates led by Britain and the US, the World Economic Forum heard on Thursday.

Winnie Byanyima, the executive director of Oxfam International, told an audience at Davos that world leaders are failing to move fast enough, or far enough, to make firms pay their fair share.

The trend of lowering corporation tax rates, in an attempt to lure companies to switch their headquarters, is making the situation worse.

Davos 2017: Hammond sees Brexit fog lifting; Oxfam warns on corporation tax - day 3 live Read more

“It’s worrying now. We’ve seen the promise from President-elect Trump to cut corporate tax. We’ve heard Theresa May threatening to make Britain a little island with low tax rates on the shores of Europe.



“These are steps in the wrong direction. This year we need to see progress on this corporate tax competition,” she added.

Byanyima was speaking on a panel on multinational tax policy in the light of the release of the Panama Papers nine months ago, which showed how companies and rich individuals exploited the international tax regime to avoid tax.

Panama’s vice-president, Isabel de Saint Malo de Alvarado, said the Panama Papers leak had identified a “global problem”, and made her government intensify its efforts to tackle the issue. “It made us run faster, we were already running,” she said.

She also attacked multinational companies who “insist on negotiating tax breaks that local companies don’t have”, when they site operations in a developing country.

Figures from the Organiation for Economic Cooperation and Development show that countries lose $240bn of revenue a year through companies shifting profits around the world. New rules come into force this year to force countries to share information between each other, to prevent companies siphoning profits to tax havens.

The OECD secretary general, Ángel Gurría, insisted progress has been made since the financial crisis. Back in 2008, there were 30 agreements to share tax information. Today there are 3,500, Gurría said.

“The promise is enormous, and the potential is very great and it could really help developing countries.”

Facebook Twitter Pinterest Winnie Byanyima, executive director of Oxfam. Photograph: Afolabi Sotunde/Reuters

Byanyima cited data showing that Kenya is losing $1.1bn (£893m) through tax exemptions and incentives each year.

“That’s almost double its health budget; in a country where one in 40 children die at childbirth. This is really a human rights issue.”

On Tuesday, the UK prime minister, Theresa May, warned European politicians that Britain would set “competitive tax rates” to lure companies and investors to Britain, if it didn’t get an acceptable Brexit deal. However, on Thursday, she told leaders in Davos that businesses need to pay their fair share of tax.

Byanyima argues that businesses need to see tax as a moral issue, and an obligation to help fund heath, education, to create jobs and opportunities for young people.

“The local corner shop where I buy bread probably pays a higher tax rate than Apple,” she added.

Oxfam is calling on the world’s richest people to “even it up”, after new data showed that the eight richest people own as much net wealth as the bottom 50% of the world population.

Oxfam International (@Oxfam) Corporate tax dodging costs poor countries $100bn/year, while many kids still don’t go to school. Let's #EvenItUp→ https://t.co/gfpjDxRXzA pic.twitter.com/9WqebzrZor

Elsewhere in Davos, President Alpha Condé of Guinea blamed “western lawyers and PR firms” for helping to create and hide complex financial structures that allow multinational companies to hide money flows.

“Corruption in developing countries is too often supported by the most prestigious lawyers, expensive PR firms and some of the biggest financiers in the world – often registered in London, New York and Zurich,” Condé said.

“They can hide behind complex company structures that make it almost impossible to determine who owns and controls them, who works for them, and where money flows,” he added.