A BLOG POST BY JULIAN BOYS When David Cameron visited Pakistan last week, he highlighted the irony that many of the country’s vastly rich elite pay no tax, while huge numbers of Pakistanis live in grinding poverty. He then called on Pakistan to tax the rich more effectively.
This caught our attention at Christian Aid, where we’ve worked for years to make the link between tax and development in the minds of politicians and the public. The Prime Minister’s comments are very welcome in this respect. Poor countries currently lose more to tax dodging than they receive in aid – a fact now acknowledged by the OECD.
Aid should only be a short term solution, because long-term dependence makes politicians accountable to donors rather than their own citizens. Taxation is the most sustainable way to finance development programmes, promoting accountability and providing a secure source of revenue.
What Cameron didn’t mention when making his remarks in Pakistan is the systematic nature of the problems developing countries face when they try to increase their tax revenues. Tax havens and secrecy in the global financial system make it easy for rich individuals and companies to avoid paying taxes in their home countries.
The UK has disproportionate power in this area as several British Overseas Territories and Crown Dependencies, over which the UK has significant control, are notorious tax havens.
Pakistan is to become the single largest recipient of UK aid over the next few years - and as cuts hit at home, some will increasingly question why the UK is footing the bill for Pakistan’s development when there is great wealth in the country.
Another perspective is simply that it is contradictory for Britain to give aid while ignoring vast sums flowing out of the country and into tax havens, rather than to Pakistan’s tax authorities.
That’s why Christian Aid and a global coalition of NGOs are calling on world leaders to lead a global crackdown on tax haven secrecy at the G20 meeting in France in November. A recent Financial Times article reveals that the ‘assault on tax havens’ promised by the G20 in 2009 did not live up to its promises. This time real action must happen to bring tax justice for people living in poverty across the world.
Find out more about the campaign, and call on David Cameron to act at the G20, by going to www.christianaid.org.uk/tax
Julian Boys works on Economic Justice Policy at Christian Aid