The lives of 1,000 young children a day are being lost to disease and poverty in poor countries because of illegal trade-related tax evasion, says a new report from Christian Aid.
It has calculated that this evasion costs the developing world at least US$160bn in lost revenue annually. The culprits are companies using false accounting to reduce their tax liability.
If that money was allocated according to current spending patterns, the lives of 350,000 children under the age of five, 250,000 of them infants, could be saved every year says the aid agency.
The sum is almost one and a half times the amount given as aid to the developing world every year. If the amount that is also lost through legal tax avoidance dodges were added, it would be many times greater.
Christian Aid’s report, Death and taxes: the true toll of tax dodging, looks at the impact of tax dodging, both legal and illegal, on the developing world. It blames the secrecy offered by more than 70 tax havens for widespread abuses, and highlights the role of facilitators, including the big accountancy firms, in promoting their use.
"We predict that illegal, trade-related tax evasion alone will be responsible for the deaths of some 5.6m children under the age of five between 2000 and 2015," says director of Christian Aid Dr Daleep Mukarji. "That’s almost 1,000 a day."
These children, along with millions of other people, are victims of a financial system in which poor countries are routinely denied the tax that is rightly theirs by transnational corporations and other businesses using methods both licit and illicit to lower their tax liability. This revenue would enable governments of developing countries to work their own way out of poverty rather than just relying on aid and debt relief, campaigners say.
"The abuse is so widespread and damaging that it is tantamount to a new slavery," said Dr Mukarji. "The rich are getting richer on the backs of some of the most impoverished and vulnerable communities in the world."
Prime Minister Gordon Brown last week called on global businesses to do more to help developing countries because the UN’s Millennium Development Goals, which are intended to halve poverty by 2015, show no sign of being met.
"The US$160bn lost tax revenues every year is several times greater than the US$40-60bn that the World Bank has estimated will be needed to meet the goals if policies and institutions in the developing world are improved," added Dr Mukarji.
Christian Aid says that the British government has a particular responsibility for what is happening as nearly half the world’s tax havens are UK overseas territories, Crown dependencies and Commonwealth countries.
It is calling on the UK government to take an international lead in pressing for reform through the removal of the secrecy that tax havens offer. Companies should also be compelled to publish their accounts on a country-by-country basis, which will mean that abusive practices can be quickly spotted.