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Tax evasion by Royal Dutch Shell and other multinational corporations ‘costs lives of 5.6m children’

The Independent: Tax evasion ‘costs lives of 5.6m children’

By Sean O’Grady, Economics Editor

Monday, 12 May 2008

The lives of more than five million children could be saved in the developing world – if the super-rich and the world’s largest companies paid their fair share in taxes, according to a leading British charity. In Death and Taxes: the True Toll of Tax-dodging, Christian Aid says that the extent of tax abuse “is so widespread and damaging that it is tantamount to a new slavery”.

The charity estimates that governments in the poorest countries are being cheated out of at least $160bn (£82bn) a year in tax revenues, much more than the $40 to $60bn the World Bank estimates is needed to pay for the United Nation’s Millennium Development Goals (MDG). The MDG aim of halving poverty by 2015 would save 350,000 children’s lives a year.

The director of Christian Aid, Dr Daleep Mukarji, said: “We predict that illegal trade-related tax evasion alone will be responsible for the deaths of 5.6 million children under the age of five between 2000 and 2015. That’s almost 1,000 a day”. Christian Aid believes that up to $11 trillion of funds may be stashed away in tax havens.

The report notes the conventional distinction drawn between tax planning and tax avoidance, which are legal, and tax evasion, which is not, but says that avoidance is part of a “sliding scale of legitimacy”, in which ever more ingenious and complex methods are used to get around the rules and shelter corporate profits, notably through the use of tax havens, places where extreme secrecy in turn encourages a more general criminality.

It says: “The inescapable fact is that there are only four reasons for banking ‘offshore’: to avoid tax, to evade tax, to function in secret, to sidestep regulations controlling financial services or monopolistic practices. In each scenario, the pursuit of profit outweighs all other considerations, including good citizenship and social responsibility”.

Tax havens have come under increasing scrutiny lately, as European Union governments and the OECD have tried to rein in their activities. The German secret service recently paid €4m (£3m) to an informant to reveal details of money held in Lichtenstein. HM Revenue and Customs is following its example, with the hope of recovering £100m in lost revenue.

Christian Aid points out that the British Government has a special responsibility and influence because so many tax havens are linked to the Crown as overseas territories or crown dependencies. The list includes Jersey, Guernsey, the Isle of Man, the Cayman Islands, Bermuda and the British Virgin Islands. Ironically, Christian Aid adds, even CDC plc, formerly the Commonwealth Development Corporation and still owned by the Department for International Development, pays no taxes on its £350m of profits, thanks to its use of tax havens, even though its main aim is to fund development projects.

High-profile individuals are criticised by Christian Aid for minimising their tax bills, including the Formula One racing champion Lewis Hamilton, pop star Phil Collins and U2 lead singer Bono.

The widespread use of holding companies in tax havens to hold profits, licences and intellectual property, all to reduce tax bills, is also condemned: “Every transnational corporation uses holding companies”, it said, and listed BP, Wal-Mart, Royal Dutch Shell, ExxonMobil and Ford Motor Company’s reinsurance group as benefiting from offshore holdings.

Christian Aid’s strongest words are reserved for the companies and firms of accountants who save billions through such activities as manipulating invoicing and cost structures to avoid paying taxes and royalties on mineral rights in developing economies.

Rather than protecting wealthy “non-doms” by acquiescing in the system of tax havens, Christian Aid calls on the British and Irish governments to “support international moves to curtail …the secrecy of tax havens, thereby lifting the lid on the tax industry and its machinations”.

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