Who pays
the price?
hunger: the hidden
cost of tax injustice
Poverty is an outrage. It robs people
of dignity, freedom and hope,
of power over their own lives.
Christian Aid has a vision – an
end to poverty – and we believe
that vision can become a reality.
We urge you to join us.
IDCS is an Indian government-sponsored programme and India’s
primary social welfare scheme to tackle malnutrition and health
problems in children aged under 6 years of age and their mothers.
Christian Aid partner Chetna Vikas helps some of the most
remote and poorest communities in India to access and improve
government welfare schemes available to them
Christian Aid/Sarah Filbey
hunger: The hidden cost of tax injustice 1
contents
Introduction
2
1. Hunger – the true extent
5
2. Why tax dodging means people go hungry
9
3. How tax justice could help combat hunger in India, El Salvador and Ghana
14
4. Secret links: how companies can use tax havens to dodge taxes
28
5. Swissploitation: the hidden cost of trading with Switzerland
32
6. Recommendations: what political leaders need to do in 2013
40
Endnotes
44
Abbreviations
48
Appendix
49
I
Christian Aid/Name Name
Christian Aid/Susan Barry
This is a standard picture caption, it is the same width as the
columns on the main pages
Ana Maria Ayala’s maize crop was completely destroyed by floods
in El Salvador in October 2011. Most of El Salvador’s farmers
rely on what they can grow in their smallholdings. Inequality,
an unfair tax system and lack of government investment in
agriculture mean almost half the population live in poverty, and
one-third of all children aged under five die from malnutrition
hunger: The hidden cost of tax injustice 3
Hunger still blights the lives of one in eight of the
global population – some 868 million people.1 Progress
towards halving the number of people who are hungry
by the year 2015, a goal set by world leaders at the turn
of the century, is disappointing.
In sub-Saharan Africa, the number of people
undernourished has actually increased. In Asia too, the
figures are alarming. India, at the forefront of newly
emerging economies, is still home to a quarter of
the world’s hungry, with more than 40 per cent of its
children malnourished and stunted.2
Hunger has many causes: harvests ruined by flood
and drought – both increasingly common due to
climate change – lead to shortages and rising prices
that poor people can ill afford. In addition, a woeful
scaling back of investment in small-scale farming in the
developing world has hit the ability of communities to
feed themselves. So, too, has the impact of large-scale
cash-crop plantations, particularly those producing
biofuels, which have forced poorer farmers off the land.
Conflict also plays a role in exacerbating hunger: crops
are burned or seized for feeding armed groups; people
are driven from their homes; and there is a shortage
of labour because of recruitment into armies and
militias. Employment for migrant workers also ceases
– as in the recent cases of Libya and Ivory Coast –
ending the sending home of income to communities
in neighbouring states where food shortages may
also be acute.
Massive rich-country investment in commodity funds
is yet another factor contributing to rising prices – its
impact now so marked that a number of banks no
longer offer such portfolios.3
Global acceptance that everyone is entitled to
‘a standard of living adequate for the health and
wellbeing of himself and of his family, including food…’4
was enshrined more than 60 years ago in the United
Nations’ Universal Declaration of Human Rights,
with subsequent UN declarations and conventions
underlining the duty of governments to respect,
protect and fulfil that right.5
That the world remains a long way off seeing these
commitments met is a shameful indictment of modern
day priorities, for the sad truth is there would be enough
food to sustain every man, woman and child on Earth if
the interests of the poor were properly upheld. Lacking,
however, is the political will needed to safeguard their
rights, and sufficient resources in developing countries
to implement pro-poor policies that would usher in
lasting change.
In 2013, a mass campaign by more than 120
organisations in the UK has been launched6 to draw
attention to some of the key steps that could – and
should – be taken to help eradicate hunger. Key
demands include greater support for small-scale farmers
who produce about four-fifths of food supplies in
developing countries, as well as measures to address a
fundamental malaise that hampers the efforts of poorer
governments to help themselves: illicit capital flight and
tax dodging by multinational corporations (MNCs).
Christian Aid estimates that businesses that benefit
from lack of transparency in trade and financial systems
deprive the poorer countries where they trade of some
US$160bn (£102bn) in tax revenues every year – far
more than such countries receive in aid.7
Tax revenues are predictable and sustainable
sources of income. They are fundamental to allowing
developing-country governments to foster human
development. But most poorer countries lack the staff,
expertise and access to corporate information to counter
activities such as transfer mispricing, in which some
MNCs manipulate the profits they make and often hide
them offshore.
In this report, Christian Aid provides new evidence of
how an end to such practices, coupled with appropriate
development policies, could make major progress
towards eradicating world hunger. We realise that not all
the revenues raised would automatically be channelled
to priority areas such as health and nutrition. There are
other priorities such as education and infrastructure.
There also remain the challenges of corruption and
government profligacy; challenges to which Christian
Aid and our partners are rising. But without doubt, fairer
tax systems and greater tax revenues could lead to
increased practical measures to reduce food insecurity.
4 Who pays the price?
Chapter 1 looks at the extent of world hunger today.
Chapter 2 explains how unsustainable tax competition,
ineffective tax systems and financial secrecy enable
MNCs and wealthy individuals to illicitly shift capital to
jurisdictions with low or zero tax rates, thus dodging
taxes and maximising profits. It also looks at the
practical measures that could be funded with the
money lost.
Chapter 3 looks at three middle-income countries –
India, El Salvador and Ghana – showing how unfair tax
systems and low tax revenues affect the lives of the
poor.
Based on the analysis of a sample number of MNCs
operating in our three country examples, chapter 4
shows that those with connections to tax havens are
paying 28.9 per cent less in taxes as a percentage of
profits than MNCs with no tax haven links.
Chapter 5 looks at the role one tax haven, Switzerland
(the most secretive of all, according to a recent survey
by the Financial Secrecy Index8), plays in helping MNCs
shift profits and dodge taxes. Analysis of trade data
shows that developing countries could have lost as
much as US$578bn (£368bn) between 2007 and 2010
from MNCs trading with or via Switzerland. This is far
more than the annual estimated US$50.2bn (£32bn)
cited in a 2012 UN Food and Agriculture Organization
report that would be needed to create a world free from
hunger by 2025.9
Finally, chapter 6 contains policy recommendations
about how to tackle financial secrecy, illicit capital flight,
and tax avoidance and evasion. The UK government, as
chair of the G8 in 2013, and the government of Ireland,
as President of the European Union for the first six
months of the year, have a golden opportunity to take
determined action to make tax justice a major weapon
against poverty and hunger. It’s an opportunity they
must not shirk.
1. hunger –
the true extent
Christian Aid/Antoinette Powell
Dorcas in the yard of her parents’ home in Fooshegu, northern
Ghana. Thanks to the support of Christian Aid partner Northern
Presbytery Agricultural Services, her father, Samson Napatia, is
able to give her and her five sisters three nutritious meals a day,
even during the hunger season when food is traditionally scarce.
Samson cannot speak highly enough of Northern Presbytery
Agricultural Services’ field officers. Since they came to his
community with practical ideas to help farmers grow more, his
maize harvest alone is 10 times larger – enough to see him to
the next harvest. Until the government has the funds to employ
more of its own field officers, it will fall to NGOs like Northern
Presbytery Agricultural Services to fill in the gaps
6 Who pays the price?
… hunger is neither the result of demographic problems
nor just the result of a mismatch between supply and
demand. it is primarily the result of political factors that
condemn small farmers, the main victims of hunger, to poverty
Olivier de Schutter, UN Special Rapporteur on the Right to Food10
Progress has been made in the fight against hunger
since the start of the millennium, when 919 million
people went to bed hungry every night. Today, the figure
stands at 868 million, a reduction from 15 per cent of the
world’s population to 12.5 per cent.11
To that figure, however, must be added another
1 billion people who continue to suffer a lack of
essential micronutrients.12 Known as ‘hidden hunger’,
micronutrient deficiencies increase the rate of disease,
lower life expectancy and impair cognitive development,
learning ability and productivity. The result is a tragic
loss of human potential with far-reaching implications.
In India, for example, iron and iodine deficiencies that
cause stunting are estimated to result in productivity
loss equivalent to 2.95 per cent of GDP annually.13
Although there has been some progress in recent years
in reducing the number of children globally affected
by hunger, malnutrition and related causes still lead to
the deaths of 2.3 million children every year.14 Indeed,
childhood malnutrition is the underlying reason for an
estimated 35 per cent of all deaths of children under
the age of five in the developing world, with those that
survive often suffering long-term irreversible damage.15
Meanwhile, one in every six children aged under five in
developing countries is underweight, while as many as
one in four suffers stunting.16 Recent research suggests
that children under five who are malnourished are likely
to see their future earnings reduced by almost a quarter.17
Women, who make up a little over half the world’s
population, suffer disproportionately, accounting for
some 60 per cent of the world’s hungry as a result of
persistent, deep gender inequalities.18
Table 1: Number of hungry people worldwide (millions)
1990/1992
1998/2001
2004/2006
2007/2009
2010/2012
1,000
919
898
867
868
Source: FAO, The State of Food and Agriculture, 2012.
Table 2: Geographic distribution of hunger
Region
Number of
millions hungry
Developed regions
16
Africa
239
Asia
563
Latin America and
the Caribbean
49
Oceania
1
World
868
Zenabu Razak, caterer at
Gbanyamni primary school
in Ghana, prepares the lunch
that will be provided free to
all of the school’s pupils as
part of Ghana’s free school
feeding programme
Christian Aid/Antoinette Powell
Source: FAO, The State of Food and Agriculture, 2012.
hunger: The hidden cost of tax injustice 7
When promises become empty words
In recent years, world leaders have been party to a
series of undertakings and pledges to tackle hunger
head-on. In 2000, at the Millennium Summit, they
agreed to reduce poverty at historically unprecedented
rates through collaborative global action. The first of the
eight millennium development goals (MDGs) aimed to
halve the percentage of people affected by hunger by
the year 2015.
We have the means; we have
the capacity to eliminate
hunger from the face of the earth in
our lifetime. We need only the will
US President John F Kennedy, 1963
In 2008, the year food-price spikes triggered rioting
in more than 30 countries, the UN Secretary-General
established a High Level Task Force on the Global
Food Security Crisis, which included heads from UN
specialised agencies, and the World Bank and IMF.
A G8 Summit in Aquila (Italy) in 2009 then agreed a Food
Security Initiative that committed US$20bn (£12.7bn)
over three years for sustainable agriculture development
and safety nets for vulnerable populations.19 However,
much of the money was later not forthcoming.
That same year, at the World Summit on Food Security,
held in Rome by the UN’s Food and Agriculture
Organization (FAO), world leaders unanimously
pledged renewed commitment to eradicating hunger
‘sustainably and at the earliest date’. They set as
their target reducing ‘respectively the proportion and
the number of people who suffer from hunger and
malnutrition by half by 2015’.20
The then-FAO director-general, Jacques Diouf, stressed
the need to produce food where the poor and hungry live,
and to boost agricultural investment in those regions.21
Yet, despite all promises made, a look at the percentage
of people suffering from hunger and the actual number
of people undernourished shows that progress has
been disappointing. In southern Asia, where 327 million
children, women and men were undernourished in 1990,
the decrease after more than two decades has been
less than 5 per cent. Worse still, in Africa, the number
of hungry people has increased by 36 per cent over the
same period, from 175 to 239 million people.
The truth is we are a long way from halving the number
of people suffering from hunger.
Table 3: Progress made towards halving the number of people who suffer from hunger, expressed as
prevalence of hunger
Region
Baseline
1990/1992
1998/2001
2004/2006
2007/2009
2010/2012
MDG
target
2015
Level of
achievement*
World
18.6%
15%
13.8%
12.9%
12.5%
9.3%
65.6%
Africa
27.3%
25.3%
23.1%
22.6%
22.9%
13.65%
32.2%
Asia
23.7%
17.7%
16.3%
14.8%
13.9%
11.85%
82.7%
Latin
America
and the
Caribbean
14.6%
11.6%
9.7%
8.7%
8.3%
7.15%
88.1%
Oceania
13.6%
15.5%
13.7%
11.9%
12.1%
6.8%
23.1%
Source: FAO, The State of Food and Agriculture, 2012.
*‘Level of achievement’ is our own calculation.22
8 Who pays the price?
Table 4: Progress made towards halving the number of people (in millions) who suffer from hunger,
expressed in absolute terms
Region
1990/1992
1998/2001
2004/2006
2007/2009
2010/2012
WFS
Target
2015
Achievement*
World
1,000
919
898
867
868
500
26.4%
Africa
175
205
210
220
239
87.5
No reduction
Asia
739
634
620
581
563
369.5
47.6%
Latin
America
and the
Caribbean
65
60
54
50
49
32.5
49.2%
Oceania
1
1
1
1
1
0.5
No reduction
Source: FAO, The State of Food and Agriculture, 2012.
*‘Level of achievement’ is our own calculation.
2. Why tax dodging
means people go
hungry
Christian Aid/Simon Williams
Women prepare food for the Jan Satyagraha marchers.
Christian Aid partner Ekta Parishad organised the march in 2012.
More than 50,000 poor and landless farmers marched peacefully
to demand rights to the land they have worked on for years.
Eight days into the month-long march, the Indian government
agreed to their main demands
10 Who pays the price?
We are determined to use our [g8] presidency to drive a serious
debate on tax evasion and tax avoidance. This will include
action to help developing countries collect tax that is due to them
UK Chancellor of the Exchequer George Osborne, February 2013
Why tax justice is essential to
combat hunger
The face of global poverty – and therefore hunger – has
changed in recent years. Whereas two decades ago
most of the world’s poor people lived in low-income23
countries, today two-thirds are to be found in countries
that the World Bank classifies as middle-income
countries, such as India and China.24
With that change, in the UK at least, a growing chorus
of dissent has questioned whether countries that are
relatively rich, in comparison to least-developed nations,
should still receive aid, particularly at a time of cuts in
public services at home.25
The argument ignores such salient facts as the minimal
difference in per capita income between low-income
countries and the economically disadvantaged in middleincome countries. It ignores too the sheer scale of need
in many of today’s emerging economies. In Brazil, for
instance, a country that has a GDP almost as large as that
of the UK, some 16 million people – the same number as
live in the Netherlands – go hungry every day.26
Christian Aid would like to see a world free from hunger
and poverty, where aid is no longer necessary. For this
to become a reality, the causes of poverty need to be
addressed and developing countries need to find the
resources to cope on their own.
As a sustainable and predictable source of finance,
tax revenues have a key role to play in fostering
economic self-sufficiency for both the developed and
the developing world. Providing a sound economic
footing for development, fair and efficient tax systems
also have an impact on the body politic itself, leading to
greater transparency and accountability on the part of
governments as taxpayers demand evidence of how
their money is being spent.27
The UK government says: ‘Governance appears to be
better where governments have to earn their incomes
by taxing a wide range of citizens and economic
activities... Well-managed taxation systems can play a
major role in state building.’28
Today, however, low-income countries collect an average
of only 13 per cent of their GDP in tax revenues, compared
to around 35 per cent in countries in the Organisation for
Economic Co-operation and Development (OECD).29 The
UN estimates that if the world’s least-developed countries
raised at least 20 per cent of their GDP from taxes – still a
long way from the rate in the developed world – they could
achieve all the MDGs – including halving the number of
people living in hunger.30
There are, of course, cogent reasons why developing
countries are unable to raise the requisite amount. Large
numbers of their citizens, especially smallholder farmers
in rural areas, live in poverty and do not enjoy taxable
incomes. In addition, such countries have large untaxed
‘informal’ sectors.
Revenues are also lost when developing countries offer
major tax incentives to foreign companies in return for
investment. The fear is that without such tax breaks,
the companies may go elsewhere. In recent years,
development agencies, including Christian Aid, have
sought to draw attention to the huge costs associated
with tax incentives. In fact, evidence seems to suggest
that costs are often found to be higher than the benefits
derived from the investment they seek to attract.
Finally, one of the most important factors working
against developing countries is tax avoidance and
evasion by MNCs and wealthy individuals. In 2008,
Christian Aid estimated that tax evasion associated to
trade mispricing by MNCs costs developing countries
around US$160bn (£105.3bn) a year, far more than they
receive in aid.31
Dealing with the ‘corporation tax gap’ in developing
countries could, according to research by the IF
campaign, raise enough public revenue to save the lives
of 230 children under five every day.32
how companies are able to dodge tax
Foreign direct investment, the investment in
commercial activities in one country by a business in
another, rose by 2,000 per cent between 1982 and 2011
to US$1.5tn (£955bn).33
To attract the vast amounts of foreign capital now
available, many countries have resorted to potentially
damaging tax ‘competition’, such as the reduction of
corporate income tax rates, the granting of generous tax
incentives to foreign corporations, and even, in some
cases, lax legal enforcement and the promotion of
secrecy provisions, eg banking secrecy laws.
Some countries – those generally known as tax havens
or secrecy jurisdictions – have made their capacity to
attract foreign capital their major economic activity.
The prime attractions they offer are a low or zero tax
hunger: The hidden cost of tax injustice 11
rate and financial secrecy, heedless of the damage that
might cause elsewhere.
A lack of inter-government cooperation at regional and
global levels and the effective influence of powerful
beneficiaries from the tax competition phenomenon
have resulted in numerous legal loopholes as well
as a lack of transparency, which enables MNCs and
wealthy individuals to shift capital and profits in secret
to minimise their tax liability.
Financial secrecy enables other forms of illicit capital
flight too, including corruption. Raymond Baker, a senior
fellow at the US Center for International Policy and an
internationally respected authority on money laundering,
has estimated that some 3 per cent of money moved
illicitly around the world consists of the proceeds of
bribery and theft by government officials.40
One method used by some MNCs is transfer
mispricing, where different subsidiaries of the same
corporation sell goods and services to each other at
manipulated prices. False invoicing involves similar
transactions taking place between unrelated companies.
Research published last year estimated that US$854bn
(£543bn) illicitly escaped from sub-Saharan Africa
between 1970 and 2008. This figure is double the
official development aid flows over the same period,
and four times the size of Africa’s debt in 2008,41 thus
making sub-Saharan Africa – the region with the highest
prevalence of undernourishment – a net creditor to the
rest of the world.
With 60 per cent of world trade, according to the OECD,34
now taking place between companies that are part of the
same MNC, such transactions play an important part in
artificially distributing profits and tax liabilities.35
It’s clear that far-reaching global action is needed to prise
open the financial secrecy of tax havens that not only
facilitates tax dodging, but also hides the proceeds of
corruption, drug trafficking and other crimes.
However, transfer mispricing is not the only mechanism
used by corporations to dodge taxes. As ActionAid’s
recent report on Associated British Foods shows,
corporations establish complex corporate structures to
exploit tax legal loopholes and benefit from the existing
network of tax agreements between countries (double
tax treaties).36
Governments have their role to play (as outlined in
chapter 6), but MNCs do too. The UN Guiding Principles
on Business and Human Rights state that corporations
have the duty to respect human rights, including
the right to be free from hunger.42 However, when
corporations engage in abusive tax avoidance or evasion,
they create an adverse impact on the human rights of
others. Such activities, even when legal, are increasingly
being seen as immoral.
These complex corporate structures often involve the
establishment of subsidiaries in tax havens. The sheer
scale of business now conducted through tax havens is
immense. More than half of world trade today follows
such a route: half of all banking assets are held offshore
and one-third of foreign direct investment is channelled
through such accounts.37
This secret world allows vast amounts of money to
be hidden from public scrutiny, facilitating tax dodging
and massively reducing revenues that could promote
development. The OECD has estimated that the money
lost by developing countries to tax havens is nearly three
times the amount of aid they receive.38
More recent research by the Tax Justice Network
estimates that rich individuals alone could be hiding as
much as US$21tn (£13.4tn) in tax havens. If the capital
gains of 3 per cent of US$21tn (£13.4tn) were taxed at
30 per cent, it would generate revenues of US$189bn
(£120bn) a year.39
how tax revenues can reduce hunger
Tax revenues should account for at least 20 per cent
of a country’s GDP for sustainable development to
become a reality.43 Indeed, evidence suggests that
African countries with higher tax collections generally
have lower levels of undernourishment: countries
collecting more than 20 per cent of their GDP in tax had
an average level of undernourishment of 15 per cent
during 2005-08, while those collecting less than 10 per
cent had an average rate of undernourishment of 32
per cent.44
Increasing tax revenues is necessary to end hunger
and poverty. However, what matters most is how
governments make an effective use of the financial
resources available. In this sense, the effective
investment of tax revenues to increase the productivity
of smallholders’ agriculture and develop appropriate
pro-poor markets becomes essential.45
12 Who pays the price?
Today, more than half the population of the developing
world (3.1 billion people) live in rural areas and, of these,
2.5 billion derive their livelihood from agriculture. In
many developing countries, agriculture remains the main
driver of economic growth and is often the sector that is
most resilient to global economic crises.46
At least half of the food consumed in the world
is produced by smallholders, who produce food
for subsistence and/or for sale to local, as well as
sometimes regional and international, markets. These
farms are the backbone of rural economies.
However, many food-producing households are trapped
in poverty, often not producing enough for their own
consumption or making only meagre profits from their
sales, so they are unable to build up assets or invest
in practices that could help increase and diversify their
production, cope better with risks and uncertainties, and
seize market opportunities.
As well as enhancing food security and maximising
the productivity of limited arable land, the right kind
of support for smallholders can contribute to poverty
reduction through multiple benefits, including providing
employment,48 building resilience to sudden changes
in the weather or other factors affecting food supply,
empowering women and vulnerable or excluded
communities, and enhancing the natural resource base
on which the future of food production depends, for
instance by promoting soil-conservation practices.49
The World Bank estimates that agriculture growth
is three times more effective in reducing extreme
poverty than growth in other sectors, particularly in rural
areas.50 A thriving agricultural sector is a strong basis
for economic diversification, creating new opportunities
that can contribute to much-needed economic
differentiation and employment.
Tackling tax dodging and financial secrecy could provide
the US$50.2bn required every year to tackle hunger.
Food insecurity47 persists because sufficient food is not
produced or available to poor people in those places
where it is most needed, and because poor people
cannot afford to buy enough food to meet their needs.
Other important causes of hunger are natural hazards
such as droughts and floods, slow-onset climate change
and environmental degradation, lack of income security
and other safety nets, as well as dispossession of some
of the world’s most vulnerable people from land.
Even if smallholders produce enough to sell, food
markets are characterised by power inequalities and
policy and infrastructure failures, which keep small-scale
food producers poor, limiting their purchasing power
and preventing food from being distributed to where
it is needed. In many developing countries, local food
markets are fragmented, and in the case of staple foods,
the usual mechanics of demand and supply do not work
at all, especially in sub-Saharan Africa.
Christian Aid/Sarah Wilson
Low levels of production are the result of lack of
government investment in smallholder agriculture
for many decades. Small-scale farmers are often
marginalised by policy-makers, and lack the ability to
influence policies and programmes to their benefit,
particularly over the provision of agricultural research
and technology development, rural credit, transport
infrastructure, and access to markets to buy and
sell goods.
In El Salvador, Rosa Cruz worries about her son and
husband. With no other jobs available, they work in the
sugar cane fields, where they are exposed to toxic chemicals.
Her husband is already suffering from chronic kidney failure,
which could be caused by the pesticides used in the fields
hunger: The hidden cost of tax injustice 13
What developing-country governments could do to combat hunger
Tackling tax dodging and illicit capital flight could
provide much needed revenue to help combat food
insecurity. Governments in developing countries
should use tax revenue effectively, particularly in
support of measures to improve food security. This
could include:
crops they grow, removing barriers to innovation
and adaptation (for example, lack of access to
improved seed varieties), and integrating disaster
risk reduction strategies and climate services with
agricultural development work
●●
●●
supporting food production for local and national
domestic consumption and regional markets
through investment in agricultural research
involving local farmers (including smallholders),
and the development of technologies appropriate
to their needs, including irrigation and storage
capacity
●●
implementing effective programmes of social
protection for the most vulnerable groups
promoting education and health systems,
including improving nutritional education,
healthcare and family planning, and access to
water and sanitation.
In addition, actions should be taken to:
●●
●●
●●
ensuring equitable access, especially of women,
to credit and land, with a focus on long-term
sustainable development
promoting sustainable food production,
which is commercially viable and profitable,
environmentally sound, inclusive and equitable
promoting pro-poor markets, for example through
the development of thriving and integrated local
food industries in which food producers can add
value to their products and improve their access
to markets
●●
●●
●●
●●
●●
●●
improving infrastructures, such as road systems,
to support food transportation
building the population’s resilience to food
shortages by helping farmers to diversify the
adopt policies to prevent and manage excessively
volatile food price fluctuations
empower small-scale producers and their
organisations in decision-making about public
spending on agriculture and rural development
challenge unsustainable production and
consumption in industrialised countries, and
highlight the links between food and energy,
including the problems of biofuels expansion
promote stronger and more equitable global
governance, particularly of international trade,
agricultural investment, and financial and
commodities markets.
3. hoW tax justice could
help combat hunger
in india, el salvador
and ghana
The Jan Satyagraha 2012 campaign for land rights for some of the
poorest people belonged to, and was rooted in the experiences of,
the Indian people. Yet Christian Aid partner and march organiser
Ekta Parishad stressed the importance of global solidarity to this
campaign, striving for justice on a very global land issue. With
secure access to land and free from the fear of being forced off
their land by big business, farmers are able to invest their time
and resources in caring for the land and ultimately grow more
food for their communities
Christian Aid/Simon Williams
hunger: The hidden cost of tax injustice 15
I
Table 5: Poverty and inequality in India
Population
1,245 million
Gross national income (GNI) per capita
US$3,296 (£2,096)
Position in Human Development Index (2011)
134
Income GINI coefficient
36.8
Average income: 20% richest over 20% poorest ratio
5.6
Population living on less than US$1.25 (£0.80) a day
41.6%
51
Source: United Nations Development Programme (UNDP), Human Development Report 2011.
Table 6: The goal to eradicate hunger in India
1990-1992
2004-2006
2010-2012
2015 target
(reduce by 50%)
Level of achievement
in 2012*
Number of people
undernourished
(millions)
240
238
217
120
19.1%
Proportion of people
undernourished
26.9%
20.9%
17.5%
13.45%
69.9%
Source: FAO, The State of Food Insecurity in the World, 2012.
*‘Level of achievement’ is our own calculation.
Table 7: Child undernourishment in India
Table 8: India in the Global Hunger Index 201252
Percentage of children who are stunted
47.9%
Percentage of children who are
underweight
43.5%
Mortality (per 1,000 births)
66
Source: UNDP, Human Development Report 2011.
India’s gross national income (GNI) per capita doubled
between 1995 and 2010.53 Yet, one in every four hungry
people in the world lives in the sub-continent. As the
tables above clearly indicate, India will not reach the
target to halve the incidence of hunger by 2015.
While the proportion of undernourished people has
fallen by 35 per cent since 1990, the actual number of
people still suffering from hunger only decreased by
9.5 per cent, from 240 million in 1990 to 217 million in
2012. Almost half of the children under the age of five in
India suffer from stunting, while more than 40 per cent
of children and 30 per cent of women are underweight.
In addition, it is estimated that as many as 80 per cent
of children and 56 per cent of women are anaemic.54
Global Hunger
Index
1990
1996
2001
2012
30.3
22.6
24.2
22.9
Source: International Food Policy Research Institute
(IFPRI), Global Hunger Index 2012.
At the current pace of events, India would only achieve
the goal of halving hunger by 2043.55 As the Nobel Prize
winner Amartya Sen put it: ‘there is probably no other
example in the history of the world development of an
economy growing so fast for so long with such limited
results in terms of broad-based social progress’.56
India, with a score of 22.9, ranks 66 out of 79 countries
in the Global Hunger Index (GHI), worse than Niger or
Sudan. But the aggregated national data hides important
internal disparities.
According to the India State Hunger Index57 analysed
by the International Food Policy Research Institute in
2008, the scores ranged from 13.6 for Punjab to 30.9
16 Who pays the price?
for Madhya Pradesh, the worst-performing state. Punjab
would actually rank 34th when compared to the GHI
2008 country rankings (between Nicaragua and Ghana),
while Madhya Pradesh would be ranked 82nd (between
Chad and Ethiopia).
The same analysis showed that 12 of India’s 17 states
fall into the ‘alarming’ category’, while the situation in
one, Madhya Pradesh, was ‘extremely alarming’. For the
majority of states, high child underweight ratios were the
key reasons for the high GHI score.58
Despite the significant and sustained growth rates
experienced in India in the past two decades, 3,000
people still die of starvation every year.59 But it is not as
though the country failed to produce enough food for
everyone. In fact, India sold around 10 million tons of
food grain in open market in 2012.
Christian Aid/Simon Williams
Handling of food stocks remains a key challenge in
India.60 Some 80,400 tons of food grain rotted in 2012
Ekta Parishad activist Sita Ram holds a jar containing
donations – often given by people with precious little to
spare – to support the Jan Satyagraha marchers
due to lack of storage facilities.61 The government
claims that its ability to ensure food for all is limited by
budgetary constraints.
The national food security Bill and
the public distribution system
In October 2010, concerned with the alarming state of
food insecurity in the country, the National Advisory
Council (NAC) drafted a National Food Security Bill,
proposing legal food entitlements for 75 per cent of
the population.
In January 2011, an expert committee set up by the
then prime minister examined the Bill and made several
recommendations, including reducing the percentage of
the population entitled to the benefits of the programme
from 75 to 63 per cent.
Based on these recommendations, a draft Bill was
circulated in September 2011 by the Ministry of Food,
Consumer Affairs and Public Distribution for public
feedback. The Bill finally proposes food grain entitlement
for up to 75 per cent of the rural population and 50 per
cent of the urban population. Of these, at least 46 per
cent of the rural population and 28 per cent of the urban
population are declared as priority households and are
entitled to 7kg of subsidised food per person per month
(non-priority households are entitled to 3kg per person
per month). Hence, the Bill follows a targeted public
distribution approach.
However, many in India, including Christian Aid partner the
Centre for Budget and Governance Accountability (CBGA),
claim that all citizens in India should be entitled to the food
distribution system. For households to be entitled to the
food distribution system, they need to be identified as
poor by the government and receive the corresponding
Below Poverty Line card. In the past, methods used to
identify potential recipients were proved to be based on
faulty estimates of who was living below the poverty line.
As a result, the programme failed to reach many in need.
Three different national surveys62 have shown that as
many as half of the current poorest households in India do
not have a Below Poverty Line card.63
One of the main arguments for the government to opt
for a targeted system was the need to control spending.
According to CBGA, ensuring food for all vulnerable
households would cost an additional US$20.6bn
(£13.1bn) per year. This figure could be reduced if
transport systems and storage capacity were improved.
hunger: The hidden cost of tax injustice 17
Niyanci’s experience of the public distribution system (PDS)
Christian Aid/Sarah Filbey
Shortages used to be a major issue. ‘We were
really struggling; villages were isolated… we were
only having one meal a day and we didn’t have any
means to improve our food supply’, Niyanci recalls.
Most of the households were registered as BPL
– Below Poverty Line – which meant that they
were entitled to PDS grain, but collecting it entailed
an 8km walk to the nearest grain dealership.
‘We had to carry it far on our heads and cross the river
during the rainy season. It would take us an entire
day to collect the rice, and when we reached the
dealership, we were often told the distribution date
had changed,’ explains Niyanci.
‘We weren’t informed about when the rations had
arrived. Also they would update the passbook [to
show we’d collected], but say that the rations hadn’t
come. Months would pass at a time in that way,’
she says, recounting a common tale of corrupt
administration of such schemes, which are not
properly monitored.
The consequences to families that depended on
these rations were significant. ‘When we were not
getting rations on time we would have to go for casual
labour, we’d migrate and be underpaid,’ she explains.
Niyanci Miranda lives in a village called Parasdah,
in the state of Jharkhand, where the prevalence of
hunger is the second-highest in the country.
She is a member of a local women’s group that
was established with the support of Christian Aid
partner Chetna Vikas. The group has been running
the government’s public distribution system, which
provides subsidised foods in an area covering
more than 1,000 households. However, while food
security has significantly improved in Parasdah and
neighbouring villages, it was not always like this.
The situation improved when the women’s group,
after organising protests, was offered the chance to
take over the distribution.
‘We realised the importance of organising these
women and giving them a platform from which to
claim their rights and entitlements,’ explains Rani
Kumari of Chetna Vikas.
Niyanci concludes: ‘Although the government is doing
quite a lot, it is not enough. We were lucky, but most
of the programme does not reach all people in need
in India. Many go still hungry.’
18 Who pays the price?
H
Given India’s sustained period of growth – between 1990
and 2010, per capita income grew at almost 5 per cent a
year in real terms64 – the Indian government’s claims that
budgetary constraints hamper its ability to improve food
security for the 212 million people that are undernourished
stretch credulity. Low tax revenues, however, are an issue.
With a tax-to-GDP ratio of 16.8 per cent, India obtains
a relative very low level of income compared to other
emerging economies. Brazil, for instance, has a 34.2 per
cent ratio, while South Africa’s tax revenues represent
31.2 per cent of its GDP.65
Another key characteristic of the Indian tax system is the
relatively low part played by direct taxes (personal and
corporate income taxes). In 2009-10, they represented
37 per cent of total tax revenues, one of the lowest of
all G20 countries, and well below South Africa at 57.5 per
cent and Russia at 41.3 per cent. 66
One reason for the short fall is the low tax rate enjoyed
by high earners. The current 30 per cent rate is lower
than the average maximum personal income tax rate in
sub-Saharan Africa, which is 35.07 per cent.67
With around 3,500 disputes over alleged mispricing,
India has the most transfer-mispricing cases in the world
after Japan and Canada.70 According to the country’s
Directorate of Transfer Pricing, the amounts involved
in mispricing ran at US$8.1bn (£5.2bn) in 2010-11 and
US$12.6bn (£8bn) in 2011-12.71 Corporation tax of 33
per cent on these amounts would have provided an
additional US$6.9bn (£4.4bn).
That wealthy individuals and MNCs in India have
significantly engaged in illicit capital flight and tax
avoidance and evasion practices is also confirmed
by recent research conducted by Global Financial
Integrity.72 The Washington-based think tank estimates
that India could have lost as much as US$462bn
(£294bn) between 1948-2008. The transfer of deposits
from Indian to offshore banks by individuals and
corporations is identified as one of the key routes of
illicit financial flows out of the country. As the share of
offshore deposits increased from 36.4 per cent of total
deposits in 1995 to 54.2 per cent in 2009, deposits in
Indian banks fell commensurately to 45.8 per cent.
Not surprisingly, according to research by the OECD,
Mauritius, a tax haven, appears to be the top investor
country into India.73
As for corporate income tax, research shows that there
is a significant difference between the statutory tax rate
(33 per cent) and the rate that is effectively being paid
(24 per cent).68 Despite this, a new Direct Tax Code Bill
proposes to lower corporate taxes even further.
Generous tax exemptions enjoyed by businesses and
individuals also help account for the low level of tax
raised as a percentage of GDP. A government estimate
of the revenue foregone in exemptions in 2011-12 alone
was US$99bn (£63bn), which represents a staggering
5 per cent of GDP.74
Illicit capital flight and tax dodging in the form of transfer
mispricing by national corporations endeavouring to take
tax advantages (such as a tax ‘holiday’) in the special
economic zones69 that have been created, as well as by
international corporations shifting profits to lower tax
jurisdictions, are a major problem.
Table 9, based on research by Christian Aid partner
CBGA, suggests tax-policy changes that could provide
additional revenue. The figures seem to indicate that
with a fairer and more efficient tax system, the Indian
government could find the resources required to
ensure food security for all its citizens.
hunger: The hidden cost of tax injustice 19
Table 9: How tax policies could provide revenue to tackle hunger
Area of intervention
Policies to be adopted
Estimated annual
additional tax revenue
Marginal tax rate on personal
income
Increase marginal income tax rate on income above
US$37,000 (£23,532) from the current 30 per cent to
40 per cent.
US$5.8bn (£3.7bn)
Capital gains tax
Re-introduce long-term capital gains tax on securities
transactions, and tax short-term capital gains
progressively as personal income. The current
zero tax on long-term capital gains on securities
privileges stock market speculation and favours
wealthy individuals.
US$13bn (£8.3bn)
Property tax, including
wealth, inheritance and
municipal property tax
Expand and make property tax more progressive;
re-introduce inheritance tax (estate duty); improve
the targeting and valuation system for municipal
property tax.
US$15.3bn (£9.7bn)
Tax arrears
Tax arrears should be collected immediately, and no
laxity should be shown in filing cases.
US$11.5bn (£7.3bn)
Tobacco tax
Increase taxes on tobacco, as the current rate is low
according to international standards.
Increase of US$3.4bn
(£2.2bn) and save
US$5.6bn (£3.6bn)
on tobacco-related
diseases.
General anti-avoidance rule
(GAAR)
A strong GAAR should be introduced in order to
tackle aggressive tax planning by corporations.
The government decided to postpone this measure
to 2015-16.
Advance pricing agreements
(APAs)
APAs could be established with some relevant
corporations as a means to avoid transfer mispricing.
US$4.3bn (£2.7bn)
Double tax avoidance
agreements
The current double tax agreements with Mauritius
and Singapore need to be reviewed in relation to the
treatment of capital gains tax.
US$2.3bn (£1.5bn)
20 Who pays the price?
E
Table 10: Poverty and inequality in El Salvador
Population
6.225 million
Gross national income (GNI) per capita
US$5,925 (£3,768)
Position in Human Development Index (2011)
105
Income GINI coefficient
46.9
Average income 20% richest over 20% poorest ratio
12.1
Population living on less than US$1.25 (£0.80) a day
5.10%
Source: UNDP, Human Development Report 2011.
Table 11: The goal to eradicate hunger in El Salvador
1990-1992
2004-2006
2010-2012
2015 target
(reduce by 50% )
Level of
achievement
in 2012*
Number of people
undernourished
(millions)
0.79
0.71
0.76
0.395
7.5%
Proportion of people
undernourished
15.6%
12.6%
12.3%
7.8%
42.3%
Source: FAO, The State of Food Insecurity in the World, 2012.
*‘Level of achievement’ based on our own calculations.
Table 12: Child undernourishment in El Salvador
Percentage of children who are stunted
24.6%
Percentage of children who are
underweight
6.1%
Mortality (per 1,000 births)
17
Table 13: El Salvador in the Global Hunger Index 2012
Global Hunger
Index
1990
1996
2001
2012
10.1
8.7
5.4
5.7
Source: IFPRI, Global Hunger Index 2012.
Source: UNDP, Human Development Report 2011.
In El Salvador, the extent of undernourishment remains
the same as 20 years ago. Despite a gross national
income per capita of almost US$6,000 (£4,000),
the prevalence of hunger is very similar to the world
average: one in eight people are hungry.
Although classified as a lower-middle-income country, a
recent government survey75 shows 47.5 per cent of the
population (47.6 per cent of women and 47.3 per cent of
men) live in poverty, of whom more than a third (15.46
per cent) live in extreme poverty. The government’s
estimation is thus largely consistent with the figures of
undernourishment provided by FAO, as shown in table
11 above.
One child in four is stunted and, according to a recent
World Bank study, 38 per cent of children aged 6-24
months are anaemic. In addition, one-third of all
deaths of children under five is considered caused by
malnutrition.76 ‘Eating varied and nutritious food remains
a challenge in El Salvador’, the World Bank concluded.
Inequality also remains an issue in El Salvador. In 2011,
the richest 20 per cent of households enjoyed 58.3 per
cent of the national income, while the poorest 20 per
cent accounted for just only 2.4 per cent.77 Exacerbating
matters is an unfair tax system, where those with the
greatest ability to pay face the least taxes.
hunger: The hidden cost of tax injustice 21
A
El Salvador’s lack of progress in tackling hunger cannot
be readily understood without considering the damaging
effects of the stabilisation and structural adjustment
programmes implemented since 1989. These are the
series of reforms demanded by donor governments and
international financial institutions of poorer countries in
return for aid.
In El Salvador’s case, they included a decrease in
trade tariffs, the suppression of agricultural marketing
boards, increases in the costs of agricultural inputs, the
elimination of guaranteed prices to producers, a cutting
back of agricultural research and technical assistance to
farmers, and the reduction of credit to agriculture (from
20 per cent of total credit in 1980 to 7 per cent in 2011).78
All are factors that help to explain to a large extent the
collapse of agricultural production, especially of rice,
A vulnerable community
Christian Aid/Olga Castro
The community of Milagro Belen is located in
Candelaria, a municipality in Cuscatlán Region. It is
home to 350 people (200 women and 150 men),
most under the age of 35, grouped into 96 families,
all living in poverty.
Families in the community mainly eat fruits and
vegetables, with occasional meat and dairy products.
Food consumption is severely limited due to
unemployment, problems to access markets, lack of
land security and insufficient credit.
Rosa Denis Aguilar, a 46-year-old woman, describes
the precarious living conditions faced by families in
corn, vegetables, meat and eggs. In 1993, El Salvador
produced 93 per cent of the food grain consumed: today,
only 28 per cent of rice, 54 per cent of corn and 62 per
cent of beans eaten are produced locally. All the rest are
imported. In the case of vegetables, 70 per cent of the
amount consumed is imported.79
Today El Salvador invests just 1.5 per cent of its budget
in agriculture, as opposed to 5.2 per cent in 1990.80 More
than 80 per cent of its farms are small-holdings that
do not produce for market, nor do they have access to
modern production techniques and credit.
Unsurprisingly, the damaging effects of earlier policies
have led to a significant increase in migration. In
1990, 60 per cent of the population lived in rural areas,
as opposed to 37 per cent today, while 3 million
Salvadorans have left the country, most to seek
new opportunities in the US.81
the community. ‘A small piece of land was assigned
to me by the community, so I can now produce
some vegetables for our own consumption during
the rainy season. Unfortunately though, I cannot sell
food at the market as we need to pay US$2 (£1.27)
a day if we want to sell, or US$1 (£0.64) if you only
want to be there in the morning, but there have been
days where I sold nothing and had no money to pay
even US$1 (£0.64).
‘I cannot get a decent job, and I cannot buy meat,
milk or even cereals for my children. I sometimes
work for another woman and sell the products that
she gives me, but with that I only earn US$3 (£1.91)
a day, not enough to take care of my family.
‘The fact that larger companies and wealthy
individuals do not pay their fair share of taxes is
outrageous. I wonder how it is acceptable that the
poorest people in El Salvador have to pay VAT, if
then large national and international companies do
not pay taxes. The government has to require large
companies to pay their taxes, and with that money,
it needs to create programmes to support rural single
mothers, old people, and communities through
access to land, decent jobs, and seeds and fertilisers
to grow our own food.’
22 Who pays the price?
The government of El Salvador is currently implementing
a five-year development programme, with a total budget
of US$4.8bn (£3bn), or an average of US$975m (£620m)
per year. This plan focuses mainly on improving access
and quality of essential services, while only 4 per cent
of the budget (US$40.6m/£25.8bn) is directly devoted to
promoting agricultural production.82
Christian Aid’s partner FESPAD (Foundation for the Study
and Application of Law) considers that the government
should urgently upscale the plan to a total investment
of US$1.4bn (£0.9bn) per annum. Some of the priorities,
as identified by FESPAD, should include the increase in
the level of credit available, the expansion of the national
production area, the growth of storage capacity, the
investment in agricultural research, the improvement of
irrigation systems and the promotion of women’s access
to credit and land.
In addition, the tax system continues to be highly
regressive, which partly explains the high level of
inequality. Compared to OECD economies, indirect
taxes in El Salvador provide a higher share of revenues
than direct taxes.
Within direct tax revenues, companies contribute 40
per cent more than individuals. Within individual tax
revenues, taxes on labour represent 57 per cent of the
total,84 which suggests that the tax burden in El Salvador
is disproportionately placed on ordinary people.
El Salvador also faces a very significant challenge in
relation to tax evasion and generous tax incentives.
The government estimates tax evasion, often in the
form of transfer mispricing, costs El Salvador as much
as US$1.7bn (£1.1bn) a year, which is twice the 2012
fiscal deficit.85
Investing to develop agriculture in rural areas would not
only raise national production, but also have an important
domino effect on other sectors of the economy, such as
trade, banking services and construction, thus helping to
reduce hunger and poverty in El Salvador.
According to a report published by the Economic
Commission for Latin America and the Caribbean
(ECLAC), the overall income tax gap in El Salvador in
2005 was estimated as 45.3 per cent of the tax income
revenue, equivalent to 3.1 per cent of GDP.86
H
Of this, the tax gap for corporate income tax was
estimated as 51 per cent of the corporate tax revenue
and equivalent to 2.1 per cent of GDP, while the tax gap
for personal income tax was estimated as 36.3 per cent
of the revenue and equivalent to 1 per cent of the GDP.
Two consecutive waves of fiscal reforms have been
adopted by the government of El Salvador in the past
few years.
In 2009, new legislation was passed to counter transfer
mispricing, and the capacity of the revenue service was
increased. A second wave of reform took place in 2011
and brought significant changes in relation to direct taxes.
Some 82,000 taxpayers with income below US$503
(£320) per month were exempted from paying taxes,
while the tax rate on income above US$6,200 (£3,943)
per month was raised from 25 per cent to 30 per cent.
On corporate income tax, the tax rate on income above
US$150,000 (£95,400) was increased by 5 per cent, and
a tax rate of 1 per cent was created for businesses that
continued trading despite having declared losses for
two consecutive years. A tax rate of 5 per cent was also
introduced on dividends.
Although these are positive measures, the tax burden
as percentage of GDP in El Salvador is still below 16 per
cent, compared to the regional average at 18.3 per cent.83
As for tax incentives, a recent report by the fiscal
committee of the legislative assembly indicated that
there were 26 different laws in El Salvador that enabled
corporations to avoid taxes legally, often through the
granting of incentives.87
The same report stated that the value of these
exemptions could have been as high as US$9.3bn (£6bn)
between 2001 and 2009. For 2011, the commission
estimated a loss of US$1.2bn (£0.76bn). The tax
incentives offered in special economic zones cost
US$206.5m (£131.3m), a figure that represents 0.9 per
cent of GDP.
This implies that tax evasion and tax incentives together
are costing El Salvador more than US$2.9bn (£1.84bn)
every year. Taking action to collect 50 per cent of this
amount would provide much needed resources to
eradicate hunger in the country.
This community lost
its entire shrimp
harvest due to the
extreme flooding
across El Salvador
in October 2011
caused by Tropical
Depression 12E. With
no funds available
to help them rebuild
their livelihoods,
people had to repair
the damage and buy
new shrimp larvae
themselves before
they could start
harvesting again
Christian Aid/Susan Barry
hunger: The hidden cost of tax injustice 23
Table 14: How the government could increase tax revenue and combat hunger
Area of intervention
Policies to be adopted
Tax evasion
Strengthen legislation and the tax administration’s capacity to fight tax
evasion, with a special focus on tackling transfer mispricing.
Tax incentives
Review the current policies on tax incentives and other tax avoidance
provisions, and limit the granting of tax incentives to those cases
where they are really effective and benefits are higher than the
associated losses.
Corporate income tax
Introduce a more progressive corporate income tax system, where
those corporations that obtain higher profits contribute relatively more
to the exchequer.
Personal income tax
Apply the minimum tax rates on income above US$800 (£508) per
month, rather than the current US$503 (£320). For single mothers, this
could go up to US$1,000 (£636) per month. With this measure, it is
estimated that the government may lose US$35m (£22.3m) per year,
but it would promote consumption and reduce inequality.
VAT
Introduce a new 35 per cent tax on luxury items.
Property tax
Introduce a new tax on property, with lower tax rates in rural areas.
Tax revenues from property taxes could be transferred to municipalities
at local level.
Compiled by Christian Aid’s partner FESPAD.
24 Who pays the price?
G
Table 15: Poverty and inequality in Ghana
Population
25 million
Gross national income (GNI) per capita
US$1,584 (£1,007)
Position in Human Development Index (2011)
135
Income GINI coefficient
42.8
Average income 20% richest over 20% poorest ratio
9.3
Population living on less than US$1.25 (£0.80) a day
30%
Source: UNDP, Human Development Report 2011.
Table 16: The goal to eradicate hunger in Ghana
Ghana
1990-1992
2004-2006
2010-2012
2015 target
(reduce by 50%)
Achievement in 2012
Number of people
undernourished
(millions)
6
2
1
3
Goal achieved as of
2012.
Proportion of people
undernourished
40.5%
9.5%
5%
20.25%
Goal achieved as of
2012.
Source: FAO, The State of Food Insecurity in the World, 2012.
Table 17: Child undernourishment in Ghana
Table 18: Ghana in the Global Hunger Index 2012
Percentage of children who are stunted
28.6%
Percentage of children who are
underweight
14.3%
Mortality (per 1,000 births)
69
Global Hunger
Index
1990
1996
2001
2012
21.4
16.3
12.8
8.9
Source: IFPRI, Global Hunger Index 2012.
Source: UNDP, Human Development Report 2011.
Ghana, a middle-income country since 2010, is widely
hailed as a positive development story. Clear policies,
together with a government commitment to support
and fund them, have contributed to a significant
decline in poverty and hunger, making it one of the very
few countries in sub-Saharan Africa that could halve
poverty and hunger by 2015. Progress, however, has
been accompanied by increasing inequalities in the
living conditions of the Ghanaian people.
Agriculture is estimated to be the primary source of
livelihood for about 41.3 per cent of Ghanaians,88 with
about 80 per cent of total agricultural production in the
hands of smallholder farmers.89 Yet smallholder farming
households, and in particular food-crop farmers – more
than 50 per cent of whom are women – are poorer
and more food insecure than other groups in Ghana,
with about half of them falling below the poverty line.
Today, around a third of the population lives on less than
US$1.25 (£0.80) a day, more than 1.25 million people are
undernourished, and more than one child in every five
is stunted.
The three northern regions in particular have suffered
from lack of targeted policies for, and limited investment
in, economic development. Fifty-four per cent of the
extreme poor live in the Northern region alone, which is
home to only 17.2 per cent of Ghana’s total population.
The Upper West, Upper East and Northern regions
together make up 70 per cent of the country’s poor.90
These regions have unpredictable rainfall patterns and
only one harvest each year in contrast with two in the
south. They also face periodic drought and sometimes
hunger: The hidden cost of tax injustice 25
floods, both of which are increasing in frequency because
of climate change.91 These climatic conditions, combined
with a series of challenges in the agriculture sector, create
an alarming situation that calls for urgent action. Most
people living in north Ghana do not have access to food
for between three and six months a year.92 Families resort
to food rationing in the long, lean season, and cut back to
two meals a day instead of three. In some cases, parents
go without to enable their children to eat, and livestock
and personal valuables are sometimes sold in order to
purchase food, making the owners more vulnerable the
following year as they have fewer assets to fall back on.93
It is estimated that about 40 per cent of under-five
mortality in Ghana is linked to malnutrition.94 According to
the World Food Programme, in 2007 chronic malnutrition
among children ranged from 34 per cent to 48 per cent in
the Northern Region, and acute malnutrition from 8 per
cent to 12 per cent in the Upper West and Upper East
Regions. In a bid to increase crop yields, many children
are taken out of school to work on their parents’ farms.
pupils from deprived communities. The programme
aims at providing one hot and nutritious meal for each
child every day.
The programme targeted the feeding of 1,040,000
pupils by the end of the first phase (2007-2010), but
it was only able to reach about 67 per cent of pupils
targeted.97 An additional US$ 34.5m (£22m) would have
been required annually to meet the initial goal.98
In 2012, the programme was expected to reach 1,500,000
pupils with a funding requirement of about US$112m
(£71.2m) to meet the target. However, the government
was only able to cover 38 per cent and the remaining 62
per cent had to come from external donors.99
Currently, the programme covers just about 22 per cent of
all primary and kindergarten pupils across the country.100
Some donors have recently stopped their contributions, so
the effectiveness and sustainability of this programme is
largely dependent on a viable source of revenue.
Central to the attainment of the vision of sustainable
long-term agricultural development is the need to
commit the requisite financial resources to fund the
sector, with special attention to irrigation, research and
technology, storage facilities and credit. A Medium Term
Agriculture Sector Investment Plan (METASIP) has been
developed to achieve an agricultural GDP growth rate
of at least 6 per cent annually, based on the Maputo
Declaration’s commitment to allocate at least 10 per
cent of government expenditure in agriculture.95
E
Ghana is the first country in Africa to have adopted a
tailored national plan to promote a free school feeding
programme, following the recommendations of
the United Nations Millennium Project’s Task Force
on Hunger and the New Partnership for Africa’s
Development (NEPAD).
The programme started as a pilot in 2005 and has since
been expanded to target more than 1 million school
Christian Aid/Antoinette Powell
According to the financial and investment plan contained
in the METASIP, it will cost the government of Ghana a
total of US$766m96 (£487m) to achieve the objectives
of the sector for the period. Of this amount, the
government’s total funding contribution is 32 per cent.
Adopting policies to increase tax revenues could bridge
the funding gap of US$518.45m (£329.7m).
Children at Gbanyamni primary school enjoy their school
lunch provided through Ghana’s free school feeding
programme. Ensuring that Ghana’s government can collect
the taxes it is owed will ensure more funds are available for
the programme to reach more schools
26 Who pays the price?
Fuel for learning
Christian Aid/Antoinette Powell
‘When I eat, I get energy,’ says Fuseini. ‘I feel better
in class after I’ve eaten. If there wasn’t food for us at
school, it wouldn’t be good for us.’
Fuseini Fatmata didn’t start school until she was nine
years old. Now age 12, she’s determined to do well,
but with money tight at home, breakfast is never
guaranteed.
On the days she misses it, Fuseini struggles to
concentrate in class.
Fuseini explains: ‘Sometimes in the morning my
mother prepares rice and we eat it before coming
to school. [Sometimes] we don’t get anything. My
stomach will be boiling when we don’t eat and it’s
like a sickness to me. I feel dizzy and feel some
stomach pains and my mind is not on what they are
teaching us in the class.’
For pupils like Fuseini, Ghana’s school feeding
programme means they get at least one nutritious
meal a day and can make the most of their lessons.
P
A series of reforms in the 1980s to the Ghanaian tax
system contributed to improving overall tax collection in
Ghana, while making the system fairer. As a result, tax
revenues today, as a percentage of GDP, are well above
the average in sub-Saharan Africa.
Direct taxes in Ghana are mainly individual income and
corporate taxes. Other types of taxes in the direct-tax
category include capital gains, property and rent taxes,
which contribute marginally to the tax revenue due to
inadequate enforcement of these laws.
But many children are yet to benefit because the
feeding programme does not run in their local
school or because their parents rely on their help for
farming. This is the case of Sulemana Alhassan, who
journeys several kilometres to his family’s field to
work under the blazing sun. He is just 13.
Sulemana would much rather be at school, but
without advice and support from government on
how to grow more without the need for extra labour,
his father says he needs Sulemana’s help. ‘If I don’t
come to help my father, where will they get enough
food?’ asks Sulemana.
Sulemana doesn’t enjoy working on the farm and
would much rather be at school. ‘When I am at the
farm I don’t have a chance to talk to anybody and I
become tired. Sometimes I find when I get home
there is nothing to eat. My whole body gets weak
and I will often go to sleep early.
‘I want to be in school because I want to be a teacher
in the future. The reason I want to be a teacher is
they are normally paid at the end of each month. [If]
I got a salary at the end of each month, I could use it
to help my brothers and sister.’
The tax burden on low-income earners has been
lessened through the abolition of tax on the minimum
wage and the introduction of a lower rate for those with
incomes only marginally above the minimum wage. This
is to ensure that disposable income for household basic
consumption stays above the minimum wage.
The corporate tax rate was reduced from 32.5 per cent
in 2001 to 25 per cent in 2006. However, to increase tax
revenue, the mining sector corporate income tax rate
was increased to 35 per cent in 2012.
The contribution of direct taxes to total tax revenue has
been increasing since 2001, rising from 24.61 per cent in
2001 to 32.84 per cent in 2005, and 34 per cent in 2009.
hunger: The hidden cost of tax injustice 27
However, while the share of personal income taxes to
total direct tax revenue is increasing, that of corporate
tax fell from 47 per cent in 2005 to 40 per cent in 2009.
Indirect taxes continue to be a major source of tax
revenue, accounting by the third quarter of 2011 for
about 33 per cent of total tax revenue.101 Some provision
has been made to reduce the burden on the poor, with a
range of basic consumption items exempted from VAT.
During the 2008 food crisis, the government removed
the 20 per cent import duty on rice and other basic foods
to keep prices down.102
In the same year, a communication service tax was
introduced to help fund the national youth employment
programme (NYEP) and a 6 per cent charge is now
levied on all communications and related services
(such as internet and data services).103 As of June
2012, a total of 457,779 young people who would have
been vulnerable to poverty have been engaged in the
programme.104
Ghana passed a new transfer pricing regulation
in 2012 and has since trained a team to oversee
its implementation. It has also signed the Mutual
Administrative Assistance in Tax Matters, a convention
that facilitates the sharing of information between the
tax authorities of signatory nations.105
C
Despite Ghana’s progress in improving tax revenues and
making the system fairer, a number of challenges remain.
Coordination among the revenue collection agencies
has been a major challenge to building an efficient tax
system. This has been exacerbated by the absence of
proper mechanisms to share tax information among the
Ghanaian institutions concerned. While the government
has undertaken some important initiatives, such as
the creation of an integrated Ghana Revenue Authority
(GRA) in 2009 and the establishment of the Tax Policy
Unit to strengthen the capacity in the pursuit of
accountable, transparent and sustainable tax policies,
law and reform and capacity building is still needed.
Increasing taxes from the informal sector, in which 80
per cent of the working population is engaged, is a major
challenge because there are few records of accounts,
many people earn very little income, and workers are
often invisible to the authorities.106
Recently, new measures have been introduced including
a tax on public transport operators and a tax stamp for
small traders, but these bring in relatively little revenue.107
Christian Aid partners in Ghana have been working
with female small traders who pay taxes and demand
accountability from the government on that basis.
Generous tax incentives offered to foreign investors are
also a problem. Although corporate taxes in the mining
sector have been increased, along with a windfall profit
tax of 10 per cent, exemptions seriously undermine the
potential revenue gains.108
The IMF estimated that tax exemptions amounted
to about 1.6 per cent and 0.9 per cent of GDP in 2009
and 2008 respectively,109 while the Ministry of Finance
and Economic Planning indicate Ghana may be losing
US$700m (£445m) per annum from VAT and import
exemptions. Christian Aid partner Ghana Integrity
Initiative (GII) has been campaigning for a tax-incentive
framework that is transparent, accountable and well
targeted.
Ghana’s revenues are also being undermined by
corporations not paying their due royalties. Research110
undertaken by Christian Aid and other development
agencies in 2007 revealed that mining companies have
never paid royalties above 3 per cent, despite the higher
rates on a sliding scale stipulated in the Minerals and
Mining Act. These lower royalties led to lost revenue of
US$68m (£43.2m) a year between 1990 and 2007.
Finally, transfer pricing abuse needs to be tackled.
Analysis of the mining sector suggests that some
US$36m (£22.9m) is lost through transfer mispricing
each year.111 In addition, Christian Aid research has
showed that the average amount of tax loss to Ghana
in trade relations with the EU between 2005 and 2007
through trade mispricing was between €30.7m-€51.4m
(US$41.1m-US$68.9m/£26.2m-£43.8m) each year.112
In 2008, the country lost €62.4m (US$83.6m/£53.2m)
because of trade mispricing, which accounted for about
3.4 per cent of total tax revenue in the same period.113
The challenges described seriously undermine the
capacity to raise tax revenues and address food
insecurity and poverty in Ghana.
4. secret links:
hoW companies
can use tax havens
to dodge taxes
Mopani Copper Mine in Mufulira, Zambia. The mine is largely
owned by a subsidiary of FTSE100 giant Glencore. It has been
accused of dodging tax in Zambia, an allegation it denies. In
addition, it causes significant local environmental damage –
sulphur dioxide air pollution and soil pollution so bad that most
plants will not grow and, local people suspect, chronic pollution of
the water they drink. Christian Aid partner the Centre for Trade
and Policy Development is supporting a local campaign group to
demand improvements to the Kankoyo environment
Christian Aid/Rachel Baird
hunger: The hidden cost of tax injustice 29
New research by Christian Aid into the financial and
ownership data of MNCs operating in India, El Salvador
and Ghana strongly suggests that corporations with links
to tax havens are not paying their fair share of tax.
O
Data in Orbis is derived from official balance sheets, profit
and loss accounts, and financial statements notes, and is
complemented with news, market research, information
from official bodies (for example, stock exchanges) and
private correspondence. The producer of the data has
also developed a uniform format that is applied to each
entity analysed in order to address comparison issues. In
our own research, we used the data available in Orbis for
India, Ghana and El Salvador to produce both descriptive
and regressive statistical analyses.
Our research was to establish whether MNCs with
subsidiaries in tax havens114 pay less in taxes than
corporations without such links, based on the hypothesis
that, because tax havens offer secrecy and nil or low tax
rates, enterprises using their services have greater incentives However, two considerations need to be taken into
account. First, data available for all the required variables
and opportunities to dodge taxes than those that don’t.
for El Salvador and Ghana was limited to a relatively small
number of corporations, so the aggregated results, and
To test this, we analysed three different indicators:
therefore conclusions, are to a very large extent driven by
●●
India, for which data in Orbis is much more abundant.
pre-tax profits reported per unit of asset, as a proxy
for the corporate’s tax base115
This limitation also implies that only descriptive
●●
statistical analysis was applied to Ghana and El
taxes paid per unit of asset
Salvador, as regression models require a higher sample
●●
of observations than are available in Orbis for these
taxes paid per unit of pre-tax profit, as a proxy for
two countries.
the average effective tax rate.
The concrete research goal was to test if MNCs with
connections to tax havens report lower pre-tax profits per
unit of asset and pay less in taxes per unit of asset and
unit of profit than other multinational corporations. The
level of revenue was not used as a variable in our research
because revenue itself is often affected by profit-shifting
strategies, so the preference was to use assets instead.
In order to carry out our research, we obtained access to
Orbis,116 a commercial database containing consolidated
and unconsolidated financial and accounting data, as
well as information on shareholders and subsidiaries of
around 108 million national and multinational companies.
Secondly, because the data used in our analysis
belonged to MNCs of different sizes and operating in
different sectors with heterogeneous characteristics,
eg different average profitability ratios, we took the
precaution of controlling for these differences in our
regression model. In other words, we wanted to make
sure that differences found were really attributable to the
use of tax havens, and not to other variables such as the
size of the MNC or the sector where it operates.
Table 19 shows the results obtained in our research
when we analysed data from those MNCs with asset
values of at least US$10m (£6.36m).
Table 19: Aggregated results for MNCs with asset values of more than US$10m (£6.36m)
MNCs with no tax
haven links
MNCs with tax haven links
Indicator
Number
of MNCs
in sample
Number
of MNCs
in sample
Results
obtained for our
sample of MNCs
Profits reported per
100 units of assets
770
6.9
727
6.6
Taxes paid per 100
units of assets
681
2.3
668
2
13%
Taxes paid per
100 units of profits
680
24.2
667
17.2
28.9%
Results
obtained for our
sample of MNCs
Source: table uses data from Orbis 2010.
Differences observed: how much
less profits reported and less
paid in taxes per unit of asset and
unit of profit respectively when
the MNC has links to tax havens
4.3%
30 Who pays the price?
As table 19 indicates, MNCs with connections to tax
havens reported in 2010, on average, 4.3 per cent less
profits per unit of asset; paid 13 per cent less taxes per
unit of asset; and 28.9 per cent less taxes per unit of
profit than MNCs with no links to tax havens. These
results strongly suggest that MNCs with links to tax
havens use income-profit-shifting strategies to reduce
their tax bills.
Tables 20, 21 and 22 show the results we obtained for
each specific ratio and country on the basis of the data
available for all MNCs operating there, regardless of their
size. As stated above, only the sample for India is large
enough to draw statistically meaningful conclusions.
However, the descriptive results obtained for Ghana
and El Salvador, based on a much lower number of
corporations,117 may suggest that profit shifting could
actually be a more serious problem in those countries
with less administrative capacity to tackle tax dodging,
so further research should be undertaken.
Table 20: Profits declared per 100 units of assets
MNCs with no
tax haven links
MNCs with tax
haven links
Country
Number
Number
India
787
6.6
738
Ghana
25
4.8
3
El Salvador
15
15.9
16
Profits
Profits
6.5
How much less profits reported
per unit of asset when the MNC
has a tax haven link
1.5%
3
37.5%
4.8
69.8%
Source: table uses data from Orbis 2010.
Table 21: Taxes paid per 100 units of assets
MNCs with no
tax haven links
MNCs with tax
haven links
Country
Number
Taxes paid
Number
Taxes paid
How much less paid in taxes per
unit of asset when the MNC has
a tax haven link
India
722
2.3
685
1.9
17.4%
Ghana
6
3.1
2
0.9
71.0%
El Salvador
4
0.7
5
0.2
71.4%
Source: table uses data from Orbis 2010.
Table 22: Taxes paid per 100 units of profit
MNCs with no
tax haven links
MNCs with tax
haven links
Country
Number
Taxes paid
Number
Taxes paid
How much less paid in taxes per
unit of profit when the MNC has
a tax haven link
India
714
24.1
683
16.8
30.3%
Ghana
6
17.1
2
8.6
49.7%
El Salvador
3
22
5
8
63.6%
Source: table uses data from Orbis 2010.
hunger: The hidden cost of tax injustice 31
As indicated in table 22, MNCs operating in India
with connections to tax havens are found to pay, on
average, 30.3 per cent less in taxes per unit of profit
than those MNCs with no tax haven links. Considering
that all MNCs with tax havens links in our sample made
total profits of US$104bn (£66.1bn) in 2010, had they
paid the same effective tax rate as MNCs that do not
use tax havens, additional tax revenue ofUS$7.5 bn
(£4.8bn) would have been raised. However, we are not
suggesting that the difference in the effective tax rates
is entirely explained by profit shifting; other factors, such
as the impact of tax incentives, could have an influence
as well. In any case, the effective rate estimated in our
research is significantly lower than the Indian corporate
income tax rate (33 per cent).
Table 23: Additional tax could be obtained if MNCs with tax-haven links paid the same tax rate as other
MNCs
Profits declared
by MNCs in our
sample with tax
haven links
Effective tax rate
for MNCs with no
tax haven links
Effective tax rate
for MNCs with tax
haven links
Effective tax rate
difference
Tax revenue that
could have been
lost due to profit
shifting by MNCs
with tax haven
links
104,000,000,000
24.1
16.8
7.3
7,592,000,000
Source: research results based on our own estimation, using data from Orbis 2010.
The results obtained in the descriptive analysis are
supported by those obtained in the regression model,
as shown in appendix 1. Our regression results remain
valid when we control for both sector heterogeneity118
and company size. All the different specifications in the
regression analysis show consistent results and indicate
that MNCs with links to tax havens report fewer profits
and pay less in taxes per unit of asset and profit. In the
regression analysis, our results are particularly strong
(statistically significant) when the variable ‘taxes paid per
unit of asset’ is analysed.
Christian Aid’s research strongly suggests that
multinationals often use tax havens to shift profits
from higher to lower tax jurisdictions. In many cases,
these tax haven subsidiaries lack economic substance
(eg there are no manufacturing processes or products
sold in the tax havens market), which implies that they
could exist for the only purpose of avoiding and evading
taxes. Our findings are aligned with the analysis made
by the OECD in its recent Addressing Base Erosion and
Profit Shifting report.119 As the OECD states, the current
international tax system, characterised by inter-state tax
competition rather than cooperation, has not kept pace
with the business environment, leading to a situation
where MNCs can exploit the existing legal loopholes
and secrecy provisions to avoid paying their fair share of tax.
While the separate legal entities that form a multinational
corporation are treated from a tax perspective as if they
were independent companies, the truth is that they all
follow an overall business strategy. Today, management
lines clearly go beyond national boundaries.
In its report, the OECD identifies profit shifting as a
fundamental cause of tax dodging. Similarly, the OECD
acknowledges the increased segregation between
the location where actual business activities and
investment take place and the location where profits
are reported for tax purposes. In other words, MNCs
are transferring mobile activities to where they benefit
from a favourable tax treatment.
More importantly, the OECD states, and our findings
seem to confirm, that the current international tax
system is broken. Our political leaders need to have
the courage to review the fundamentals of the current
international tax rules to ensure that every MNC pays,
and every country receives, its fair share of tax.
5. sWissploitation:
the hidden cost
of trading With
sWitzerland
Zambian copper exports to Switzerland fetch vastly inflated sums
when sold on by Switzerland to a third country. But this money
does not get seen by ordinary Zambians, who have to put up with
the effects of living alongside mining companies. Peter Chilesh
lives in Kankoyo township, Mufulira, which is dominated by the
Mopani copper mine. Local people believe that the explosives
the mine uses underground (as part of the mining process) have
caused huge cracks to appear in their houses, as in this picture.
The mining company says the cracks exist because the houses
were built without foundations
Christian Aid/Rachel Baird
hunger: The hidden cost of tax injustice 33
switzerland is not only a tax haven, but also lacks
transparency and regulation, and it attracts commodity
trading as a dunghill attracts flies
The Berne Declaration, 2011120
In this section, we look now at macro-trade data and
show that developing countries could have lost as much
as US$578bn (£367.6bn) when trading with or via one
particular tax haven: Switzerland.
Switzerland sits at the top of the 2011 Financial Secrecy
Index drawn up by the Tax Justice Network and Christian
Aid.121 Tax haven rankings were based on the role of
each haven in global financial flows and the scale of
secrecy offered. Others, like the UK and US, did more
business, while some, such as the British Virgin Islands
and Liechtenstein, offered greater secrecy, but for the
combination of both, Switzerland came top.
Now, based on data from the UN Commodity Trade
Statistics Database (UN COMTRADE), which collates
commodity trade information from more than 140
countries, Christian Aid can provide a detailed analysis
of world trade patterns that reveals the extent to
which trade mispricing – which includes both transfer
mispricing and false invoicing – depletes the resources
available to the developing world.122
Previous analysis has suggested two dangers that
may arise when commodities are traded with, or via,
Switzerland.
Christian Aid research in 2010 highlighted how Zambian
copper, when exported from Zambia to Switzerland (on
paper at least, for precious little of the metal would have
actually made the journey to Switzerland), then fetched
vastly inflated prices when exported from Switzerland
to a third country. The price was so far in excess of what
Zambia – the producer country – received, that Zambia’s
GDP would have nearly doubled had Zambia exported
directly to the third country at the inflated price, cutting
Switzerland out of the equation.123
Analysis by the Berne Declaration, a Swiss NGO that
monitors the role of Swiss corporations, banks, and
government agencies, highlighted in 2011 the fact that
many commodities bought by companies registered in
Switzerland never actually reach its borders.
‘Contracts may be concluded, deliveries scheduled
and ships chartered from Swiss offices, but the actual
goods... never touch Swiss soil. [...] In this way, the flow
of goods conveniently eludes the official statistics of
the Federal Customs Administration – one reason for
the notorious lack of transparency in the business,’ the
Berne Declaration said.124
According to research by the Berne Declaration, transit
trade via Switzerland could represent 15-25 per cent
of the world’s commodity trade.125 In transit trade, a
company based in Switzerland purchases goods from a
supplier or their own subsidiaries abroad and sells these
on to a buyer also abroad, without the goods entering
Switzerland. Currently, transit trade is recorded in
Switzerland as trade services, rather than as imports and
exports. As a result, exporting countries do not have the
capacity to track their goods once they leave their country.
Exporting countries do not know where their goods will
eventually end up, so many of them report these trade
operations as exports to Switzerland, only because
this is where the transit traders that initially buy the
goods operate from (even if the goods will never reach
Switzerland and will therefore not be recorded as
imports there).
In the past decade, the value of transit trade via traders
based in Switzerland has increased as much as in the
previous four decades. In fact, the value of transit trade
via Switzerland in 2011 was 36 per cent higher than
Switzerland’s GDP. Most of the goods sold abroad by
Swiss transit traders were commodities (94 per cent),
in particular energy commodities (59 per cent). Mineral
commodities accounted for 20 per cent and agricultural
commodities 15 per cent.126
Switzerland has consolidated as a commodity trade
hub and attracts many new trading companies largely
because of its preferential tax status, generally loose
regulatory and business-friendly environment, banking
secrecy provisions and extensive capital markets.
The transformation of transit trade into an extremely
important industry within the Swiss economy has
gone almost unnoticed by the general public.127 Most
companies active in transit trade are not listed and
therefore do not have to publish financial statements.
The current opacity provides huge opportunities for illicit
income shifting out of developing countries.
The international division
of labour leads to certain
countries specialising in
gaining while other countries
specialise in losing
Olivier De Schutter, UN Special Rapporteur on the Right to Food128
34 Who pays the price?
We seek to establish the following:
●●
●●
trade with all other partner countries.
How much do developing countries lose from
sales of their commodities to or via Switzerland?
(‘Swissploitation’ is the label we use to describe the
difference between the price developing countries
receive and the price the commodities are then sold
on for by companies registered in Switzerland.)129
Following this process, we could then combine the
excess margin between Switzerland and all other
partner countries with the known quantity of declared
exports to Switzerland to generate an estimate of the
capital loss suffered by countries when trading with
Switzerland, rather than with any other country.
What proportion of trade is obscured by transit
trade via Switzerland, where commodities traded
by Switzerland-based companies never reach Swiss
soil and are not recorded by the authorities there? (In
other words, how much trade disappears into what
we have called the ‘black hole of Geneva’?)
Of course, we could not pretend that there are no
distortions in trade, eg no trade mispricing with any
country other than Switzerland. The implication of this
assumption, however, is to lower the estimate of the
distortion in Swiss trade, compared to what we would
find if we could genuinely compare with a zero-distortion
baseline, so the resultant estimates of both capital shift
and untraced volume are inevitably conservative.
The nature of our analysis
The simplest analysis would be to compare a given
volume of exports that has a given value from country ‘X’
to Switzerland with the re-export volume and value of the
same commodity from Switzerland to other countries.
However, data limitations130 mean that it would
be impossible to explain what proportion of the
discrepancies exposed in this way simply reflected
those limitations rather than being a particular feature
of trade with Switzerland. A somewhat more cautious
approach was therefore required.
To achieve this, we established benchmarks for
‘reasonableness’. This involved looking at the trade of
individual commodity exporters with all other partner
countries (ie countries importing the commodities) other
than Switzerland, and using this data to determine a
reasonable value for:
(i) the price margin – the difference between the
original export price and the subsequent re-export
price by the partner country
(ii) the untraced volume – the difference between
the volume of trade declared as exports to a given
partner country and the volume declared as imports
by that partner country.
The benchmarks of ‘reasonableness’ we obtained
by exploring data with all trade partners other than
Switzerland were then compared with the data related
to trade with or via Switzerland. In other words, we
compared the excess price margin and the excess
untraced volume for trade with Switzerland with the
excess price margin and the excess untraced volume for
In practice, when we undertook the research, we
came upon a further problem. The declared prices for
many commodity exports leaving Switzerland were
so far above the prices for equivalent exports from all
other countries that in other research one would likely
consider these as ‘outliers’ (anomalies) and remove
them from the main analysis. In this case, however, it is
their anomalous nature that is of interest.
To deal with this, we first knocked out the few cases
in which reported Swiss export prices were more than
1,000 times higher than those of the original exporter.
For these cases, we replaced – and normalised – the
estimate of capital shift by a simpler one: how much
higher a total payment would the exporter country
have received if, instead of exporting to Switzerland,
the country had exported to any other trading partner
and received the average price instead. This gave us the
upper estimate of the scale of ‘Swissploitation’.
We then repeated the exercise to address those cases
where the Swiss export price was more than 100 times
higher than that of the original exporter, and where it
was more than 10 times higher. Finally, we produced an
absolute low-end estimate where the exporter country
was simply considered to have received the average
price declared on its exports to other trading partners,
rather than the price declared for exports to Switzerland.
The costs of ‘swissploitation’
Our research shows that ‘Swissploitation’ – the capital
apparently shifted out of developing countries through
their commodity trade with or via Switzerland – could
have cost these countries as much as US$578bn
hunger: The hidden cost of tax injustice 35
(£367.6bn) between 2007 and 2010. This figure is
US$67bn (£42.6bn) higher than the total global aid
budget during the same period.131
It also is far greater than the annual US$50.2bn (£31.9bn)
needed to achieve a world free of hunger by 2025, as
estimated by the FAO in its 2012 report The State of
Food and Agriculture.132
2007/10
Total Aid:
US$494.4bn (£314.4bn) 133
2007/10
Aid flows vs ‘Swissploitation’
‘Swissploitation’:
US$578bn (£367.6bn)134
0
100
200
300
400
500
Table 24 below shows that even when we remove
the cases where Swiss export prices are more than
100 times those of original exporters, the estimate
is US$441bn (£280.5bn); when we remove all cases
where Swiss export prices are more than 10 times
those of original exporters, the capital loss estimate
is US$154bn (£98bn). Finally, in the last step of our
process, when we treat all declared Swiss export prices
as entirely unreliable and rest the analysis purely on
prices declared in trade with other partner countries,
the extreme low-end estimate is US$34bn (£21.6bn).
That is, if developing countries had not traded with
Switzerland but instead received the average price from
trade with all other countries, they would have been
US$34bn (£21.6bn) better off.
600
Table 24: the cost of ‘Swissploitation’
Capital loss in exports to Switzerland, 2007-2010 (US$bn)
UPPER
ESTIMATE
Exclusions:
LOWER
ESTIMATE
Swiss export
price >
Swiss export
price >
Swiss export
price >
All Swiss export
prices
1000 X original
100 X original
10 X original
treated as
unreliable
893.7
635.5
238.6
25.5
315.7
194.1
84.2
-8.5
16.6
12.2
-2.3
-5.8
Europe and central Asia
328.2
326.0
91.4
5.1
Latin America and Caribbean
150.6
32.8
18.9
14.1
Middle East and north Africa
34.6
23.1
4.4
1.8
TOTAL LOSS
By region:
High-income
East Asia and Pacific
South Asia
2.9
2.1
0.4
-0.2
45.2
45.1
41.6
19.0
0.0
0.0
0.0
0.0
Low
18.7
18.7
17.4
16.0
Lower-middle
47.4
43.4
27.1
1.2
Upper-middle
512.0
379.3
109.9
16.7
High-income OECD
315.5
194.0
85.3
-7.5
0.2
0.1
-1.1
-0.9
578.0
441.3
154.4
34.0
Sub-Saharan Africa
By income level:
Non-defined
High-income non-OECD
Developing country totals135 Source: calculations on UN Comtrade.
136
36 Who pays the price?
For robustness, we checked the results for price margin
by considering only the major economies with which
Switzerland shares a border: Austria, France, Germany
and Italy. By doing this, we are able to confirm that
the results are not skewed by transport or any other
location-specific costs that might apply for commodities
reaching this location. The results obtained when using
Switzerland’s neighbours as a benchmark, rather than
the average of all countries, closely resemble those
presented in table 24, the developing-country totals
in each of the four columns yielding, respectively,
US$560.1bn (£356.2bn), US$427.7bn (£272bn),
US$155.6bn (£99bn) and US$61.3bn (£39bn). Only the
last figure is significantly different from those presented
in this table, implying a higher capital loss. If developing
countries received the average Austrian/French/
German/Italian price for the exports that are labelled
for Switzerland, US$61.3bn (£39bn) would have been
obtained over the four-year period, rather than US$34bn
(£21.6bn).
Finally, we calculated the value of exports excluded
from the capital shift analysis at every progressive step.
As table 25 shows, original exports with a price where
the corresponding Swiss re-export price is more than
1,000 times higher represents and excludes from the
main analysis more than 40 million metric tons of trade,
including more than 10 per cent of all lower-middleincome country exports to Switzerland. If priced highly
conservatively at the actual declared price for exports to
Switzerland, the value trade for developing countries is
more than US$50bn (£31.8bn).
The numbers increase only marginally at the next step,
implying that the extent of Swiss re-export pricing
between 100 and 1,000 times greater than that of the
original exports is not huge. Finally, the last column in
table 25 shows the extent of trade excluded from the
main analysis when we look at commodities with Swiss
export prices at least 10 times higher than the original
exports. In this case, this would exclude 85 million
metric tons of commodities, which represents 8 per
cent of all declared exports to Switzerland, but 12-15
per cent from lower-middle- and upper-middle-income
countries, with a conservative corresponding value of
US$116bn (£73.8bn). On this basis, we determine that
the associated lower estimate in table 24 is unrealistic
and understates the extent of the distortion in question.
Table 25: ‘Swissploitation’ and ‘anomalous’ Swiss export prices
Extent to which trade was excluded by addressing outliers (2007-2010)
Exclusions:
Total
excluded
Swiss export price >
Swiss export price >
Swiss export price >
1000 X original
100 X original
10 X original
Millions
of
metric
tons
Millions
of
metric
tons
Millions
of
metric
tons
%
exports
to
Switz’d
US$bn
%
exports
to
Switz’d
US$ bn
%
exports
to
Switz’d
US$ bn
41.9
3.9%
96.5
48.7
4.6%
97.5
85.1
8.0%
116.0
Low
0.0
1.2%
4.3
0.0
1.2%
4.3
0.1
2.6%
4.4
Lower-middle
9.2
12.4%
5.1
9.7
13.1%
5.1
11.0
14.9%
5.9
Upper-middle
29.1
5.5%
42.0
33.7
6.3%
42.5
63.6
12.0%
55.9
High-income
OECD
3.5
0.8%
40.4
5.4
1.2%
41.0
10.3
2.2%
45.2
High-income
non-OECD
0.0
0.1%
4.6
0.0
0.1%
4.6
0.1
9.8%
4.6
51.5
43.4
51.9
74.7
Developing
country total
38.3
66.2
Source: calculations on UN Comtrade data, for 244 countries/trade jurisdictions, 2,596 commodity codes (selected
as those most appropriate for the other elements of this analysis, focusing on price by weight comparison) and the
most recent four years of data available: 2007-2010. NB currency values are given in year 2010 US dollars, with earlier
years adjusted for inflation using the US GDP deflator from the Bureau of Economic Analysis (Feb 2012 update).
hunger: The hidden cost of tax injustice 37
The ‘black hole of geneva’
The Berne Declaration has highlighted the phenomenon
of Swiss ‘transit trade’, not recorded by customs officials
since it never physically reaches the border but is
captured elsewhere by the central bank, as akin to a flow
of services.137 The bare minimum of transparency would
require that this data is provided to the UN system
separately from the customs data we are forced to
rely on here, so that all could see the apparent pattern.
As things stand, the scale of missing trade makes it
impossible for countries and their citizens to see the
path that their commodity exports follow. Given the
scale of capital that could be lost in these transactions,
transparency here is clearly crucial – and of course it is
highly unlikely to be coincidental that we find both broad
opacity and major hidden outflows in the same countrylevel transactions.
Tables 27 and 28 show a breakdown of the top 10
countries affected by the ‘black hole of Geneva’. The
biggest loser, in terms of the opacity of its overall trade,
is Zambia, which has seen more than a quarter of its
total exports disappear in the black hole. The biggest
losers in terms of pure volume of trade are Russia,
Kazakhstan and Brazil, which between them have
seen more than 100 million metric tons disappear
over the period.
Christian Aid/Rachel Baird
The ‘black hole of Geneva’ refers to the amount of trade
for which Switzerland is the declared destination, but
which is not recorded there as an import. More than 90
per cent of commodity exports to Switzerland, in the
commodity categories used in this analysis, were simply
not recorded as imports arriving there.
A mine shaft in Kankoyo township in Mufulira district,
Zambia. It is operated by Mopani Copper Mine, which is
largely owned by FTSE100 company Glencore
26.0
3.8
0.9
7.8
24.0
-5.8
0.6
4.9
Latin America and
Caribbean
Middle East and
north Africa
South Asia
Sub-Saharan Africa
-62.5
-62.5
-213.4
-5.6
-108.6
0.6%
-0.5%
0.1%
0.5%
3783.7
1109.2
863.4
897.7
92.4%
-151.2%
69.3%
62.3%
-18.9
0.2%
1.8%
-296.8
-160.0
0.9%
0.4%
5226.7
91.8%
3726.1
90.1%
10.1
103.8
1
1779.3
84.1%
133.0
95.3
9.1
East Asia and Pacific
3747.4
83.6%
Europe and Central
Asia
111.8
Upper-middle income
Source: UN Comtrade.
By region:
15.4
Lower-middle income
18.5
-14.6
1.1%
80.2
89.6%
1.0
0.9
-471.5
0.2%
15606.9
90.1%
152.5
128.1
Developing countries
Low-income
-148.7
-0.1%
1
7005.5
-9.6%
114.6
-11.0
High-income countries
of which:
By income
level:
-620.2
0.4%
3261
2.4
43.9%
267.0
117.1
Total
Millions of
metric tons
%
Millions of
metric tons
%
Millions of
metric tons
Millions of
metric tons
‘Black
hole’: ‘lost’
exports to
neighbours
‘Black
hole’: share
of total
exports
‘Black hole’:
share of
exports to
Switzerland
Total
exports:
World
105.0
12.5
247.1
239.4
619.8
74.3
1130.0
164.9
3.2
1298.1
2161.1
3459.2
Millions of
metric tons
Total
exports to
neighbours
-25.5%
-6.9%
-17.9%
-103.4%
-44.4%
-86.4%
-26.1%
-10.1%
-25.5%
-26.3%
-97.0%
-460.0%
%
‘Black hole’:
share of
exports to
neighbours
Memo: Equivalent ‘black hole’ in trade
with Switzerland’s major neighbours
Total
exports to
Switzerland
Scale of untraceable trade with Switzerland
The ‘black hole of Geneva’:
‘Black
hole’: ‘lost’
exports to
Switzerland
Table 26: The ‘black hole of Geneva’
38 Who pays the price?
hunger: The hidden cost of tax injustice 39
Table 27: Leading countries by share of exports lost in the ‘black hole of Geneva’
Rank
Country
1
Zambia
2
Millions of
metric tons
Exports lost as a % of total
exports to Switzerland
Exports lost as a % of
total world exports
2.12
99.8%
27.7%
Burundi
0.04
97.3%
18.3%
3
Burkina Faso
0.30
100.0%
15.7%
4
Rep. of Moldova
0.38
99.4%
8.4%
5
Kazakhstan
32.24
87.2%
7.1%
6
Rwanda
0.02
99.8%
7.0%
7
Uganda
0.23
98.3%
4.5%
8
Paraguay
1.16
99.0%
3.7%
9
Tunisia
1.82
99.3%
3.6%
10
Greenland
0.02
99.7%
3.2%
Table 28: Leading countries by volume of exports lost in the’ black hole of Geneva’
Rank
Country
Millions of
metric tons
Exports lost as a % of total
exports to Switzerland
1
Russian Federation
60.80
98.7%
1.8%
2
Kazakhstan
32.24
87.2%
7.1%
3
Brazil
21.00
94.6%
1.2%
4
Indonesia
8.72
99.1%
0.6%
5
Norway
4.28
90.7%
0.5%
6
South Africa
3.69
83.9%
0.6%
7
Ukraine
3.17
98.3%
0.6%
8
Colombia
2.16
95.6%
0.6%
9
Zambia
2.12
99.8%
27.7%
10
Tunisia
1.82
99.3%
3.6%
Time to shine a light
Enough oil to meet Swiss needs 75 times over is traded
electronically via Switzerland, and more than 60 per cent
of the world’s coffee beans and 80 million tons of grains
and oil seeds pass virtually through the country every
year.138 Switzerland’s low taxes and light regulation have
transformed the country into the world’s leading market
trader in many staples of daily life, including food.
Switzerland occupies a uniquely powerful and damaging
place at the centre of a nexus of financial secrecy and
commodity trading, which strips the benefits of natural
resource wealth and economic activity away from the
poorest countries that need it most. With the opacity
that surrounds this trading, the opportunities to hide
abuse are legion.
Exports lost as a % of
total world exports
There can be no question that capital loss – and the
related tax losses – of the scale shown in this report is
causing dramatic damage to human development and
condemning millions of people to hunger and poverty.
Were trade mispricing tackled, how many children,
women and men could see their right to be free from
hunger fulfilled?
The results presented here indicate, in the strongest
possible terms, that too many countries suffer
Swissploitation, and too much development is being lost
through the ‘black hole of Geneva’. It is surely time now
to shine a light.
6. recommendations:
w hat political
eaders need
o do in 2013
Christian Aid/Antoinette Powell
Making lunch for pupils at
Gbanyamni primary school as
part of the Ghana School Feeding
Programme (GSFP). Back in
2008, it was not uncommon
for classrooms at Gbanyamni
primary to remain empty for
weeks as children missed school
to accompany their parents to
their farms. Since Gbanyamni
secured support through the
GSFP to ensure every pupil
receives a free, healthy lunch,
parents are now eager to send
their children to school to benefit
from the scheme. The GSFP is
an example of a government
introducing a policy to respond
to the pressing needs of its
population, but there are many
more vulnerable children the
programme is yet to reach
hunger: The hidden cost of tax injustice 41
people rightly get angry when they work hard and pay
their taxes but see others not paying their fair share. so this
g8 will seek to maintain the momentum generated by the g20 on
information exchange and the strengthening of international tax
standards... and we will work with developing countries to help
them improve their ability to collect tax too
UK Prime Minister David Cameron, November 2012
The evidence in this report is an urgent call to action.
Financial secrecy, especially in tax havens, allows
MNCs to deprive developing countries of badly needed
revenues to tackle the scandal of hunger. Ending
financial secrecy and ensuring governments and
business adopt greater transparency would make a
huge difference. To make that happen, two major issues
must be addressed.
First, to fight tax dodging and illicit capital flight
effectively, the revenue authorities of developing
countries must be able to access information that exists
in other jurisdictions about the assets, income and
corporate structures of all business entities operating
within their borders, particularly in tax havens. They
must also be able to investigate the accounts of wealthy
citizens held offshore. Accessing that information at
present is impossible in the vast majority of cases.
International concern about tax havens and the tax
affairs of MNCs has grown since the start of the global
financial crisis. In 2011, the G20 declared ‘we are
committed to protect our public finances and the global
financial system from the risks posed by tax havens and
non-cooperative jurisdictions’.139
The G20’s call for ‘non-cooperative jurisdictions’
(tax havens) to share more tax information has led to
a proliferation of bilateral tax information exchange
agreements between countries.140 In addition, it has
encouraged countries to sign up to a Multilateral
Convention on Mutual Assistance in Tax Matters,
making it easier for all signatories to share information
about tax affairs.141
These moves are welcome, but in practice do not go
far enough. Governments and tax havens that seek the
economic benefits of global trade should also share the
costs of making sure globalisation is not abused. These
costs include requiring automatic information exchange.
A second key issue is that at present it is often
impossible to identify the ultimate – or beneficial –
owner of a company, foundation or trust.
Obscure company ownership structures, often based
in tax havens, that disguise the identity of the beneficial
owner can facilitate tax dodging and other illicit activities.
Even law enforcement authorities frequently struggle
to identify the beneficial owner of assets held in tax
havens.
A World Bank review of 213 big corruption cases
between 1980-2010 found that more than 70 per cent
relied on anonymous shell entities, with firms registered
in the US and the UK and its crown dependencies and
overseas territories at the forefront of setting up such
companies.142
The Financial Action Task Force (FATF), a consortium
of NGOs and governments (including those of France,
Germany, Italy, Japan and the UK), has recommended
that all jurisdictions should adopt legislative measures to
guarantee the disclosure of beneficial ownership.143
Developing countries are increasingly demanding that
wealthier countries tackle tax havens, financial secrecy
and tax dodging. Indian President Pranab Mukherjee has
called for the obligatory, global automatic exchange of tax
information, describing it as ‘one of the most effective
ways to reduce tax evasion’.144 India has also called on the
G20 to ensure that tax havens join this regime.145 With
insufficient action by the wealthiest countries, others are
starting their own initiatives: 21 African countries recently
agreed the text of an African multilateral tax cooperation
agreement, providing the legal tools to pursue tax
avoidance and evasion across borders.146 While this
is positive, illicit capital flight, trade mispricing and tax
dodging are global problems that require determined
and well-coordinated global action.
a unique opportunity for the
uK government
This year, the UK will chair the G8 summit. This is a
golden opportunity to give new impetus to action on tax
havens at international level through a new Convention
on Tax Transparency, providing a framework for all
countries to cooperate in tackling tax haven secrecy.
Indeed, there is a particular onus on the UK to do so
since three British crown dependencies and 14 overseas
territories, notably the Cayman Islands and Jersey, are
among the world’s leading tax havens.
The UK government recognises that ‘tax avoidance
in developing countries deprives governments of
the vital income needed to build and maintain their
public services’, and the Department for International
Development (DFID) supports projects in developing
countries to improve tax collection and administration.147
Prime Minister David Cameron has publicly criticised
the way companies ‘use the complexity of the tax
and legal system to try and endlessly reduce their tax
42 Who pays the price?
This year, the uK hosts the meeting of g8 leaders. We are
determined to use our presidency to drive a serious debate
on tax evasion and tax avoidance. This will include action to help
developing countries collect tax that is due to them
Chancellor of the Exchequer George Osborne, February 2013148
payments’.149 As recently as November 2012, in a joint
statement with the German finance minister at the G20,
Chancellor of the Exchequer George Osborne called
for ‘concerted international cooperation to strengthen
international tax standards that at the minute may mean
that international companies can pay less tax than they
would otherwise owe’.150 Treasury minister David Gauke
has promised more international cooperation against tax
havens.151 In particular, the government has championed
the Multilateral Convention on Mutual Administrative
Assistance in Tax Matters as a platform for such
cooperation.152
However, these positive words now need to be followed
by effective action. David Cameron has said that the
G8’s approach to global injustice cannot be about ‘rich
countries doing things to poor countries’. It must be
about ‘us putting our own house in order and helping
developing countries to prosper’.153 A recent enquiry
by the all-party International Development Committee
called on the government to give more consideration to
the impact of UK tax policy on developing countries.154
The British public’s view of tax avoidance
Clamping down on tax havens and tax avoidance
is certainly popular. A 2012 YouGov poll found
that 79 per cent of the British public believe
the government is not doing enough to tackle
tax avoidance by large companies.155 Another
2012 poll revealed that 56 per cent believe that
tax avoidance by MNCs, while legal, is morally
wrong, and half think it should be made illegal.
Some 79 per cent of people polled say it is too
easy for MNCs in the UK to avoid paying tax. And
74 per cent believe that David Cameron should
demand international action to tackle tax evasion
and avoidance, with only 38 per cent saying the
government is genuine in its desire to do so.156
The Confederation of British Industry has
said that it supports ‘the end of secrecy
jurisdictions’.157
The 2013 budget should be a place to start. UK tax rules,
particularly those governing the taxation of UK
taxpayers’ overseas operations and income, should
make it harder, not easier, for MNCs to shift profits out
of developing countries, and dodge taxes.
UK tax rules could also help remove the obstacles
preventing developing countries from obtaining
information about the tax practices of UK-headquartered
MNCs, for example, by expanding the UK’s tax
disclosure rules to force companies and wealthy
individuals to disclose their participation in a much
broader range of international tax avoidance schemes,
rather than the very narrow, specialised scope of the
current rules. These disclosure rules may have helped to
curtail £12.5bn worth of sophisticated UK tax avoidance
schemes since 2004, including two £500m tax
avoidance schemes used by just one high street bank in
early 2012.158 Yet the National Audit Office has said the
rules have not yet tackled most of the tax schemes and
arrangements in current use.159
At the international level, the G8, chaired by the UK
government, should take the opportunity to commit to
and implement the highest standards on transparency
and provide a rallying point for those committed to
tax transparency.
G8 countries have been increasing the pressure on tax
havens to open up and share information on a bilateral
basis.160 This has shown that the G8 countries have the
power to force tax havens to cooperate. Developing
countries lack the political and economic power to
get similar cooperation from tax havens, and so it is
necessary for the G8 countries to make it clear that
they expect tax havens to offer developing countries the
same information that G8 countries are receiving.
R
hunger: The hidden cost of tax injustice 43
●●
The UK should also seek to both ensure that the
G8 countries are doing the best they can to set the
highest standards in tackling tax dodging, as well as
looking to use their political and economic power to
bring changes that benefit all countries.
Additional action that the governments of the UK
and Ireland should take
●●
What the UK and G8 can do at international level
To ensure we see international action that can really
deliver benefits for developing countries, we call on
the UK government to lead the G8 in taking meaningful
steps towards global tax transparency by:
●●
●●
Ending tax haven secrecy by 2016: tackle global
tax haven secrecy once and for all by launching a
Convention on Tax Transparency at the 2013 G8.
G8 governments should be the first signatories,
acknowledging that, as some of the world’s
biggest economies, they should lead in instituting
transparency measures to prevent companies and
individuals from hiding wealth – such as a global
standard for registration and public disclosure of
ownership of companies and trusts – and should
report on their progress by 2014.
Ending corporate taxpayer secrecy by 2016:
introduce country-by-country reporting for all sectors
within the G8’s own jurisdictions, and push the
International Accounting Standards Board (IASB)
to have country-by-country reporting as a global
accounting standard.
The governments of the UK and Ireland should
ensure that the G20 adopts all recommendations
provided in 2011 by the OECD, UN, World Bank and
IMF to support the development of more effective
tax systems. These include:
●●
●●
The G8 should also commit to pushing tax havens
to sign this Convention on Tax Transparency and join
the Multilateral Convention on Mutual Administrative
Assistance on Tax Matters, committing them to
sharing critical information on hidden wealth and
assets at all levels of information exchange permitted
under the Multilateral Convention; and should take
robust and binding counter-measures against tax
havens that fail to participate in these initiatives by
the end of 2013.
●●
The OECD and G20 members have recently
launched the Base Erosion and Profit Shifting
initiative (BEPS). In 2013, the governments of the UK
and Ireland should ensure that developing countries
are included in the negotiations. The measures
adopted must enable developing countries to obtain
their fair share of tax. Abusive tax avoidance by
MNCs needs to be tackled.
●●
●●
●●
●●
undertaking ‘spillover’ analysis of the impact of
their own tax systems on those of developing
countries
supporting efforts to develop policies, such as
transfer pricing legislation, to counter tax evasion
and avoidance in developing countries
promoting the development of an analytical
framework to assess the cost and benefits of tax
incentives, and developing guidance for countries
using tax incentives to attract foreign direct
investment (FDI)
promoting effective exchange of tax information
encouraging MNCs to provide the relevant and
necessary information to developing countries
in which they operate, and apply domestic rules
to ensure that transfer-pricing practices of any
particular entity do not result in a misallocation of
profit out of its jurisdiction.
At the European Union level, the governments of
the UK and Ireland should ensure that the new AntiMoney Laundering Directive removes the cloak of
secrecy around ownership of companies. National
registries should be established to collect and
publish the real (beneficial) owners of companies
and trusts. The UK and Irish governments should
encourage other countries beyond the EU to also
adopt this standard.
44 Who pays the price?
endnotes
1
S
p
2
D
C
3
h
b
f
4
d
5
R
w
6
7
t
d
8
fi
9
1
g
fi
1
1
1
1
a
F
M
1
1
1
–
c
i
1
1
I
i
2
O
D
2
2
a
t
2
l
u
o
2
p
D
2
D
m
hunger: The hidden cost of tax injustice 45
for sustainable markets in agriculture, HBF and MISEREOR, 2007.
investopedia.com/terms/s/sez.asp#axzz2JRnQ5gGY
50 See note 44.
70 ‘India has 3rd largest number of transfer pricing cases: E&Y’, The
51 Measure of the deviation of the distribution of income (or
Economic Times, 20 August 2012, http://articles.economictimes.indiatimes.
com/2012-08-20/news/33288009_1_transfer-prices-e-y-partner-intercompany-transactions
consumption) among individuals or households within a country from a
perfectly equal distribution. A value of 0 represents absolute equality, a
value of 100 represents absolute inequality.
52 According to the Global Hunger Index elaborated by IFPRI, the food
security situation is considered as ‘extremely alarming’ when the GHI is
higher than 30; ‘alarming’ for values between 20 and 29.9; ‘serious’ when
between 10 and 19.9; ‘moderate’ for values between 5 and 9.9; and ‘low’
when lower than 5. The GHI combines three equally weighted indicators:
1) the proportion of undernourished people as a percentage of the
population; 2) the prevalence of underweight children under the age of five;
and 3) the mortality rate of children under the age of five. See ifpri.org/sites/
default/files/publications/ghi12.pdf
53 World Bank, World Development Indicators Database, Human
Development Unit, South Asia Region, World Bank, 2012.
54 Government of India (2007a), National Family Health Survey 2005-06,
71 SPS Pannu, ‘I-T says transfer pricing is key to illicit fund flow’, Business
Today, 27 January 2011, http://businesstoday.intoday.in/story/consensus-ongst-may-take-time-fm/1/12800.html
72 Report available at india.gfintegrity.org/
73 Government of India (various years), Union Budget
74 Government of India (various years), Union Budget.
75 See www.digestyc.gob.sv/index.php/temas/des/ehpm.html
76 ’Nutrición de un Vistazo, El Salvador’, siteresources.worldbank.org/
NUTRITION/Resources/281846-1271963823772/ElSalvadorSPA91311web.
pdf
77 Ministerio de Economía. ‘Encuesta de Hogares de Propósitos
IIPS (International Institute of Population Science) and Macro International.
Múltiples, 2011’. Julio de 2012. http://www.digestyc.gob.sv/index.php/
temas/des/ehpm/publicaciones-ehpm.html
55 K Suneetha, P K Joshi, S Mahendra Dev, T Nanda Kumar and Vijay Vyas,
78 Banco Central de Reserva de El Salvador, Revista Trimestral,
‘A Nutrition Secure India: Role of Agriculture’, Economic and Political Weekly,
25 February 2012.
56 Dreze Jean and Amartya Sen, ‘Putting Growth in Its Place’, Outlook, 14
November 2011.
57 Purnima Menon, Anil Deolalikar, Anjor Bhaskar, The India State Hunger
Index: Comparisons Of Hunger Across States, 2008 www.theaahm.org/
fileadmin/user_upload/aahm/docs/India-State-Hunger-Index.pdf
(quarterly magazine), 2001-2012, bcr.gob.sv/esp/index.php?option=com_
wrapper&view=wrapper&Itemid=288
79 Ibid.
80 Figures obtained from El Salvador’s annual budget for respective
years.
81 Ministerio de Justicia y Seguridad Publica, El Salvador, www.
58 Ibid.
seguridad.gob.sv/index.php?option=com_content&view=article&id=79&I
temid=137
59 J Venkatesan, ‘Release 5 million tonnes of foodgrains: Supreme
82 Gobierno de El Salvador, Plan Quinquenal de Desarrollo, 2010-2014,
Court’, The Hindu, 14 May 2011, viewed on 26 December 2012, thehindu.
com/news/national/release-5-million-tonnes-of-foodgrains-supreme-court/
article2018995.ece
60 Gargi Parsai, ‘Food Minister meets Manmohan for review of
Mayo 2010, http://tecnica.presidencia.gob.sv/index.php?option=com_conte
nt&view=article&id=54&Itemid=108
83 Juan Pablo Jiménez, Juan Carlos Gómez Sabaini, and Andrea Podestá,
Tax Gap and Equity in Latin America and the Caribbean, ECLAC, 2012, www.
eclac.org/de/publicaciones/sinsigla/xml/0/39960/Fiscal_Studies_No16_End.
pdf
foodgrains procurement policy’, The Hindu, 7 November 2012, viewed
on 26 December 2012, thehindu.com/todays-paper/tp-national/foodminister-meets-manmohan-for-review-of-foodgrains-procurement-policy/
article4072395.ece
84 Ibid.
61 ‘Food grains wasted amid starvation death reports’, Ucan India, May
85 Gobierno de El Salvador, El camino del cambio en El Salvador, Mayo
2012, viewed on 26 December 2012, ucanindia.in/news/food-grains-wastedamid-starvation-death-reports/17699/daily
2010, http://tecnica.presidencia.gob.sv/novedades/publicaciones/el-caminodel-cambio-en-el-salvador.html
62 Desai, Sonalde, Amaresh Dubey, B L Joshi, Mitali Sen, Abusaleh
86 See note 77.
Shariff and Reeve Vanneman, Human Development in India: Challenges for
a Society in Transition, New Delhi: Oxford University Press, 2010.
Government of India (2007a): National Family Health Survey 2005-06, IIPS
(International Institute of Population Science) and Macro International.
Government of India (2007b): National Sample Survey (61st Round,
2004-05), Ministry of Statistics and Programme Implementation (MOSPI),
August 2007.
63 Ibid.
64 World Development Indicators Database, World Bank, Human
Development Unit, South Asia Region, 2012.
65 Revenue Mobilization in Developing Countries, IMF, 2011, www.imf.
org/external/np/pp/eng/2011/030811.pdf
66 Government Finance Statistics 2011, IMF.
67 USAID, 2010-2011. http://egateg.usaid.gov/collecting-taxes
68 Government of India, Revenue Forgone statement, Union Budget,
2008-2012.
69 Special economic zones have economic regulations that are different
from other areas in the same country. These regulations tend to contain
measures that are conducive to foreign direct investment, such as offering
companies tax incentives and the opportunity to pay lower tariffs. See
87 Daniel Trujillo, ‘Gran empresa se ha beneficiado con más de $9
mil millones del Gobierno’, Diario Colatino, 16 February 2011, www.
diariocolatino.com/es/20110216/portada/89547/Gran-empresa-se-habeneficiado-con-m%C3%A1s-de-$9-mil-millones-del-Gobierno.htm
88 Population and Housing Census 2010, Ghana Statistical Service,
statsghana.gov.gh/docfiles/2010phc/Census2010_Summary_report_of_
final_results.pdf
89 Comprehensive Food Security and Vulnerability Analysis, World Food
Programme, 2009.
90 Ghana Statistical Service, 2007, http://documents.wfp.org/stellent/
groups/public/documents/ena/wfp201820.pdf
91 W Laube, B Schraven and M Awo, ‘Smallholder adaptation to climate
change: dynamics and limits in Northern Ghana’, Climatic Change ,
111:753–774, 2012, available at www.zef.de/fileadmin/media/news/77ac_
laube-schraven-awo_smallholder_adaption.pdf
92 W Quaye, ‘Food Security Situation in Northern Ghana: coping
strategies and related constraints’, African Journal of Agricultural Research,
Vol 3(5), 2008.
93 Ibid.
94 S Antwi, ‘Malnutrition: Missed Opportunities for Diagnosis’, Ghana
46 Who pays the price?
Medicial Journal, 2008, ncbi.nlm.nih.gov/pmc/articles/PMC2643431/#R7
95 At the Second Ordinary Assembly of the African Union in July 2003
in Maputo, African heads of state and governments endorsed the Maputo
Declaration on Agriculture and Food Security in Africa. The declaration
contained several important decisions regarding agriculture, but prominent
among them was the ‘commitment to the allocation of at least 10 per
cent of national budgetary resources to agriculture and rural development
policy implementation within five years’. See www.neapd.org/foodsecurity/
agriculture/about for more details.
96 This figure is taken from the METASIP and is based on the exchange
rate as at November 2012.
97 GSFP 2011, Annual Operating Plan, available at sign-schoolfeeding.
org/_dynamic/downloads/AOP%202011%20final%20draft.pdf
Avoidance in Developing Countries: the role of International Profit Shifting,
Oxford University Centre for Business Taxation, August 2009, http://eureka.
bodleian.ox.ac.uk/3257/1/WP1012.pdf
116 Orbis is a company database published by Bureau van Dijk, bvdinfo.
com
117 Note that the number of observations for the same country varies in
the different tables. This is because each ratio requires different data so,
for the same company, Orbis can sometimes provide data to calculate one
specific ratio, but not other ratios.
118 The data used contained the four-digit NACE Rev 2 codes that provide
information on industry. In our research, in order to control for sector
heterogeneity, we used in our regression model the full set of NACE twodigit industry dummies, in line with Fuest and Riedel (2012).
98 Francisco De Carvalho, Beattie Samuel Dom, Michael
119 OECD, Addressing Base Erosion and Profit Shifting, February 2012,
MawuliFiadzigbey et al, School Feeding Program: retooling for development,
2011, available at sign-schoolfeeding.org/_dynamic/downloads/2011%20
BD%202011_GSFP_ReTooling%20for%20a%20Sustainable%20Future_
Final_report.pdf
Paris, oecd.org/tax/beps.htm
99 See note 94.
100 See note 94.
101 Government of Ghana, Budget Statement, 2012.
102 ataftax.net/news/member-news/food-security-ghana-whengovernments-care.aspx
103 The NYEP is a social development programme that is aimed at
reducing youth unemployment by engaging the youth in various short-term
job opportunities.
104 youth-employment-inventory.org/inventory/view/404/
105 The convention is a multilateral instrument for tax
cooperation and exchange of information to counter cross-border
tax evasion. See www.oecd.org/tax/exchangeofinformation/
conventiononmutualadministrativeassistanceintaxmatters.htm
106 Abena D Oduro, Gender and Taxation: the Case of Ghana, Department
of Economics, University of Ghana, January 2009, http://sds.ukzn.ac.za/
files/Ghana_PIT_2009.pdf
107 W Prichard and I Bentum of A, A & K , Taxation and Development
in Ghana: Finance, Equity and Accountability, Institute of Development
Studies, University of Sussex, www.taxjustice.net/cms/upload/pdf/
Ghana_0906_Report_printer_friendly.pdf
108 Government of Ghana Budget Statement, 2012.
109 It is unclear how these figures were arrived at by the IMF; they may
cover only import duty exemptions, which is what government figures tend
to mention. IMF, Staff report for the 2011 Article IV Consultation, 12 May
2011, p30, www.imf.org/external/pubs/cat/longres.aspx?sk=24912.0
110 Southern Africa Resource Watch, TJN Africa, TWN Africa, ActionAid,
Christian Aid, Breaking the Curse: How transparent taxation and fair taxes
can turn Africa’s mineral wealth into development, 2007, christianaid.org.uk/
Images/breaking-the-curse.pdf
111 Martin Hearson and Richard Brooks, Calling Time: Why SABMiller
should stop dodging taxes in Africa, ActionAid, 2010, actionaid.org.uk/
doc_lib/calling_time_on_tax_avoidance.pdf
112 David McNair, Andrew Hogg et al, False Profits, robbing the poor to
keep the rich tax-free, Christian Aid, 2009, christianaid.org.uk/images/falseprofits.pdf
113 See note 104.
114 In our research, we considered a jurisdiction a tax haven if it was
classified as so in at least seven of 13 different lists of tax havens elaborated
by different sources.
115 To avoid distortions through outliers, we drop observations with a
pre-tax profitability low below one or a pre-tax profitability above one. That,
however, does not qualitatively affect our results. This is consistent with
similar research conducted by C Fuest and N Riedel, Tax Evasion and Tax
120 Berne Declaration (ed), Commodities: Switzerland’s most dangerous
business, 2011, p21, www.evb.ch/cm_data/2011_09_19_Berne_
Declaration_-_Commodities_-_English_Sample.pdf
121 See financialsecrecyindex.com/2011results.html for details.
122 Commodity trade data are taken from the UN Comtrade database that
collates, standardises and makes available data from national authorities
(typically customs) on the annual quantity, value and trade-partner country
of commodity trade. United Nations Commodity Trade Statistics Database,
Department of Economic and Social Affairs/Statistics Division, http://
comtrade.un.org/db/
123 Andrew Hogg, Rachel Baird, Nick Mathiason and Alex Cobham,
Blowing the Whistle. Time is up for financial secrecy, Christian Aid, 2010,
pp22-23, http://bit.ly/CABtW
124 See note 115, p38. As documented by The Berne Declaration, the
Swiss National Bank (SNB) does provide some additional data on the
‘transit’ trade (ie the trade that never reaches the country). However,
this does not allow equivalent analysis against the global standard data
that the UN Comtrade database provides. One clear advocacy ask that
emerges from this, however, would be for the SNB to provide this data in
the appropriate form to the UN system as a separate trading category from
actual (non-‘transit’) Swiss trade.
125 See note 120.
126 Swiss National Bank, Swiss Balance of Payments, 2011, p37, snb.ch/
ext/stats/bop/pdf/en/bop.book.pdf
127 Ibid, p39.
128 Quoted in: Why No Thought for Food? A UK Parliamentary Inquiry into
Global Food Security, January 2010.
129 This analysis is based on commodities for which there exists trade
records in Balance of Payments, so not on transit trade, which is recorded in
Switzerland as trade services.
130 Complications in the data collation process mean that there are some
limitations to what can be expected of the dataset. Comtrade lists six
limitations, which can be summarised as follows.
1. Confidentiality results in some data on detailed commodity categories
not being available, although this is still captured in data on higher-level
aggregates.
2. Coverage is not complete; that is, while the database runs from 1961 to
the present, not all countries report all of their trade for every year.
3. Classifications vary; that is, different commodity classifications are
used by different countries in different periods, so comparisons cannot
always be exact.
4. Conversion cannot always be precise; that is, where the database
includes data that has been converted from one classification to
another, these will not always map precisely one on to the other and
hence imprecision may result.
5. Consistency between reporters of the same trade is not guaranteed:
that is, exporter and importer country will record the same trade
hunger: The hidden cost of tax injustice 47
differently ‘due to various factors including valuation (imports CIF,
exports FOB), differences in inclusions/exclusions of particular
commodities, timing etc’.
6. Country of origin rules mean that the ‘partner country’ recorded
for imports will generally be the country of origin and need not imply
a direct trading relationship. These limitations mean that caution is
required, but do not prevent reasonable use of the data.
131 It is important to note that our estimation of Swissploitation refers
to recorded trade only, and excludes possible capital lost through transit
trade, which surely offers – because of its lack of transparency – higher
opportunities to hide profits.
132 ‘Over this period, incremental annual public expenditures of
US$50.2bn are estimated to be required (in addition to existing levels
of funding) to support investment in rural agriculture, natural resource
conservation, research, development and extension and rural institutions,
but also to provide safety nets aimed at those suffering from hunger’. FAO,
State of Food Insecurity in the World, 2012, fao.org/docrep/016/i3027e/
i3027e.pdf
133 www.oecd.org/dataoecd/42/20/47457763.xls
134 United Nations Commodity Trade Statistics Database, Department of
Economic and Social Affairs/Statistics Division, comtrade.un.org/db/
135 Note that developing country totals include ‘low-income’, ‘lowermiddle-income’ and ‘upper-middle-income’ countries.
136 UN Comtrade data, for 244 countries/trade jurisdictions, 2,596
Independent, 11 October 2011, independent.co.uk/news/business/news/
british-firms-attacked-for-routine-use-of--tax-havens-2368753.html
149 A Goodhall, ‘Large companies should pay “a fair tax rate”, says
Cameron’, Tax Journal, 6 January 2012.
150 Patrick Wintour, ‘UK and Germany agree tax crackdown on
multinational companies’, the Guardian, 5 November 2012, guardian.co.uk/
business/2012/nov/05/uk-germany-tax-crackdown-multinationals
151 David Gauke MP, Exchequer Secretary to the Treasury, at the Cross
Atlantic and European Tax Symposium, speech on 9 September 2011, hmtreasury.gov.uk/speech_xst_090911.htm
152 David Gauke, House of Commons, Hansard, 3 November 2011,
c733W. Development Minister Stephen O’Brien has said: ‘The government
strongly supports improvements in international tax information exchange
to help all countries, including developing countries, tackle tax evasion and
avoidance. The work of the Global Forum on Tax Transparency and Exchange
of Information, which the UK fully supports and which developing countries
are being encouraged to join, is particularly important in this respect. In
addition, one of the government’s first acts on coming into office was to
sign up to a new international protocol strengthening the Organisation
for Economic Co-operation and Development (OECD)/Council of Europe
Convention on Mutual Administrative Assistance in Tax Matters.’ House of
Commons, Hansard, 18 October 2011, c910W.
153 David Cameron, ‘A G8 meeting that goes back to first principles’, EU
Observer, 21 November 2012, http://euobserver.com/opinion/118265
commodity codes (selected as those most appropriate for the other
elements of this analysis, focusing on price by weight comparison) and the
most recent four years of data available: 2007-2010. NB currency values
are given in year 2010 US dollars, with earlier years adjusted for inflation
using the US GDP deflator from the Bureau of Economic Analysis (Feb 2012
update).
154 House of Commons, International Development Committee, ‘Tax
137 Berne Declaration (Ed), La Suisse, Le Negoce et La Malediction des
156 ‘Majority of British adults say tax avoidance is “morally wrong”’,
matieres premieres, Swiss Trading SA, 2011.
138 Rupert Neate, ‘Swiss fear role as haven for secretive resource traders
will cost the country’, the Guardian, 29 November 2012, guardian.co.uk/
world/2012/nov/29/switzerland-commodities-trading-political-cost
in Developing Countries: Increasing resources for development’, Fourth
Report of Session 2012-13, 16 July 2012.
155 ActionAid, Collateral Damage: How government plans to water down
UK anti-tax haven rules could cost developing countries – and the UK –
billions, March 2012 , p1.
Christian Aid press release,16 August 2012, christianaid.org.uk/pressoffice/
pressreleases/august-2012/british-adults-tax-avoidance-morally-wrong.aspx
157 ‘CBI backs end to financial secrecy, as MPs investigate tax dodging’,
35.
Christian Aid press release ,27 February 2012, christianaid.org.uk/
pressoffice/pressreleases/February-2012/cbi-backs-end-financial-secrecymps-investigate-tax-dodging.aspx
140 ActionAid, Addicted to Tax Havens: The secret life of the FTSE 100,
158 HMRC, ‘Tax avoidance schemes closed’, 27 February 2012; OECD,
139 Cannes G20 Summit Final Declaration, 4 November 2011, paragraph
October 2011, p7.
141 ‘G20 renews the fight against tax haven secrecy’, Christian Aid press
release, November 2011, christianaid.org.uk/pressoffice/pressreleases/
november-2011/g20-renews-the-fight-against-tax-haven-secrecy.aspx
142 World Bank/UN Office on Drugs and Crime, The Puppet Masters: how
the corrupt use legal structures to hide stolen assets and what to do about
it, 2011.
143 See ‘Beneficial ownership’ at http://www.financialtaskforce.org/
issues/beneficial-ownership/ and Global Witness, Undue Diligence:
How banks do business with corrupt regimes, March 2009, http://www.
globalwitness.org/library/undue-diligence-how-banks-do-business-corruptregimes
144 ‘India presses for automatic exchange of tax info at G20’, Times
of India, 21 April 2012, http://timesofindia.indiatimes.com/business/
international-business/India-presses-for-automatic-exchange-of-tax-infoat-G20/articleshow/12800220.cms
145 ‘G20: India to press for transparency in tax haven functioning’, Times
of India, 18 February 2011, http://articles.timesofindia.indiatimes.com/201102-18/india/28614879_1_tax-havens-black-money-tax-information
146 ‘Twenty-one African Countries finalise Mutual Assistance Agreement
in collecting taxes’, African Tax Administration Forum, 2 August 2012.
147 guardian.co.uk/commentisfree/2013/feb/16/george-osborne-on-his-taxreform-agenda
148 A Grice, ‘British firms attacked for routine use of tax havens’, The
Tackling Aggressive Tax Planning through improved reporting and disclosure:
report on disclosure initiatives, February 2011, p17; HMT press release,
‘Government to tighten net round cowboy tax advisers’, 23 July 2012.
159 National Audit Office, Tax avoidance: tackling marketed avoidance
schemes, 21 November 2012.
160 The FATCA regulation in the US has led to many countries, including
some tax havens, agreeing to automatic information exchange with the US.
48 Who pays the price?
abbreviations
APA: advance pricing agreement
GNI: gross national income
BEPS: Base Erosion and Profit Shifting
GRA: Ghana Revenue Authority
CBGA: Centre for Budget and Governance
Accountability
GSFP: Ghana School Feeding Programme
IASB: International Accounting Standards Board
DFID: Department for International Development
MDGs: millennium development goals
DOTAS: Disclosure of Tax Avoidance Schemes
ECLAC: Economic Commission for Latin America and
the Caribbean
METASIP: Medium Term Agriculture Sector
Investment Plan
MNCs: multinational corporations
FAO: Food and Agriculture Organization of the United
Nations
NAC: National Advisory Council
FATF: Financial Action Task Force
NEPAD: New Partnership for Africa’s Development
FDI: foreign direct investment
NYEP: national youth employment programme
FESPAD: La Fundación para el Estudio y la Aplicación de
la Ley (Foundation for the Study and Application of Law)
OECD: Organisation for Economic Cooperation and
Development
GAAR: General Anti-Avoidance Rule
PDS: public distribution system
GDP: gross domestic product
UN COMTRADE: United Nations Commodity Trade
Statistics Database
GHI: Global Hunger Index
UN: United Nations
GII: Ghana Integrity Initiative
hunger: The hidden cost of tax injustice 49
appendix
Regression
number
Dependent
variable:
MNCs with
no tax haven
links
MNCs with
tax haven
links
1
2
3
4
5
6
7
8
9
Profitability
Profitability
Profitability
Tax per
assets
Tax per
assets
Tax per
assets
Tax per
profits
Tax per
profits
Tax per
profits
4.104***
3.608***
1.905***
1.087***
0.851***
0.724***
19.31
31.49
26.84
(0)
(6.7e-11)
(0.000734)
(0)
(1.98e-09)
(6.27e-07)
(0.558)
(0.352)
(0.443)
3.952***
3.443***
0.806
0.671***
0.441***
0.247
10.26
23.54
16.30
(0)
(1.17e-09)
(0.178)
(2.44e-06)
(0.00253)
(0.109)
(0.760)
(0.498)
(0.662)
Total assets
(log, 2010)
Industry
NACE
dummies
included
Number of
observations
0.721***
0.0572***
2.332
(0)
(0.000132)
(0.597)
No
Yes
Yes
No
Yes
Yes
No
Yes
Yes
9,545
9,466
9,466
9,212
9,135
9,135
7,988
7,916
7,916
p-value in
parentheses
*** p<0.01,
** p<0.05,
* p<0.1
Table in appendix 1 shows the results for 9 regressions, 3 per each of the variables analysed: profitability, taxes paid per unit of
assets and taxes paid per unit of profit. The first specification in each block of regressions (specifications 1, 4 and 7) shows the
results for a simple ordinary least squares model that regresses the dependent variable on two dummy variables: MNCs with
connections to tax havens and MNCs with no connections to tax havens. Specifications 2, 5 and 8 control for sector heterogeneity.
This is done by incorporating a full set of two-digit industry dummies, as provided by the Orbis database . Finally, specifications 3,
6 and 9 control for corporations’ size by including the logarithm of the firm’s total assets as an additional control variable. As the
parameters for industry dummies and total assets are largely significant, their inclusion improves the regression specifications.
Therefore, regressions 3, 6 and 9 (ie those that include all these explanatory variables) can be considered as the most suitable
for interpretation.
Acknowledgements
Main author: Alex Prats
Main contributors: Andrew Hogg, Alex Cobham (who, as
Christian Aid’s Chief Policy Officer, led on the research for chapter
5), Petr Jansky (consultant, who provided research support
for chapters 4 and 5), Ernest Okyere, John Kumar, and Alexis
Moncada.
Thanks to: Sol Oyuela, Sophie Powell, Nadia Saracini, Antoinette
Powell, Joe Stead, Heather Lowe and Joshua Simmons (Global
Financial Integrity), and Andreas Missbach (Berne Declaration).
And Christian Aid partners: La Fundación para el Estudio y la
Aplicación de la Ley (Foundation for the Study and Application
of Law/FESPAD) and Centre for Budget and Governance
Accountability (CBGA).
Editorial, design and production: Christian Aid’s Creative team.
Thanks also to: the Task Force on Financial Integrity and
Economic Development, which financially supported the
research included in this report.
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