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Coffee House

Tax avoidance needs to stop – and companies themselves must lead the way

11 February 2013

5:48 PM

11 February 2013

5:48 PM

Tax avoidance on an industrial scale in a country where almost half of children are malnourished and their families live on less than $2 a day? When I read the results of a 12-month investigation by ActionAid into Associated British Food, one of the biggest companies in Britain, it took my breath away to discover that $13 million a year was being transferred out of Zambia into tax havens. The tax avoidance ensured a maximum return for shareholders. But will those shareholders sleep soundly in the knowledge that Associated British Foods removed almost 19 times the amount the British taxpayer donates in aid money to this developing country?

The time has come for companies to accept that their customers, employees, and yes even their shareholders believe that paying a fair share of tax is an important measure of corporate social responsibility. Fancy corporate lawyers can eloquently describe the differences between tax avoidance and tax evasion, with the lines between them becoming increasingly blurred. Tax evasion is clearly wrong, illegal and unfair to the rest of society, as everyone else has to pay more in taxes to make up for those who do not pay their fair share.

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There is growing anger and concern at the fact that some large companies are hiding behind complex accounting rules that may be strictly legal, but are considered to be unethical by the public. The problem of the missing billions in tax is not just a problem in the UK; it is worldwide, and it does the greatest damage to poor and developing countries that cannot stand up to massive corporations. Action Aid’s report brings into stark contrast the power of large corporations in developing countries.

However, despite the best of intentions, Governments from around the world will struggle and I believe that in the end it will be up to the companies themselves to lead the way and they will only do that if their customers — the British public — drag them kicking and screaming towards tax transparency and a fairer tax system for us all.

Associated British Foods are one of the companies that has not yet responded to my tax challenge campaign, where I asked all FTSE 100 Chief Executives to commit to tax transparency and support an international accounting standard. I am publishing all the responses I receive on my website www.taxchallenge.co.uk so every one of us can decide individually whether the biggest companies in Britain really do care about the poorest at home and abroad.

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