Tax is key for development and transparency is a necessary step towards holding multinational companies to account for the taxes they pay, argues Christian aid in new report
Christian Aid has issued a new report called "Shifting sands: tax, transparency and multinational companies":http://www.christianaid.org.uk/images/accounting-for-change-shifting-sands.pdf Revenue authorities are often weak and fail to collect the taxes they should; the size of the informal sector makes monitoring of economic activities and the collection of taxes a huge challenge; countries are ill-equipped to monitor and effectively tax international financial flows; and there is a lack of accountability regarding agreements with and the operations of multinational companies (MNCs) and the taxes they pay.
The latter problems are exacerbated by limited international cooperation in tax matters and the lack of participation of developing countries in (or indeed their direct exclusion from) international tax matters. At present in international accounting standards, MNCs are not required to provide a country-by-country picture of their financial activities showing where profits are made and taxes paid.
Because of this, a range of stakeholders lose out: • revenue authorities and civil society cannot monitor the allocation of profit between companies operating internationally and, if necessary, challenge the company’s local tax arrangements; • investors have incomplete information when assessing risk (including tax risk); • tax-compliant and responsible companies miss the opportunity to demonstrate powerful public evidence of their corporate social responsibility (CSR) in regards to tax payment.