Over the past decade, seldom has a month gone by without the subject of corporate tax avoidance making headlines.
And despite some progress towards tackling the problem at a national and international level, it is clear that the issue is far from resolved.
Throughout, both ActionAid and KPMG have been active and vocal players in the debate. And during that time, we have come to understand each other’s views and principles. Whilst we don’t always agree, we have come to respect the arguments put forward by each, as well as the motivations behind them.
Yet whilst differences remain, there is also common ground.
Principally, we both believe that there is a problem to be addressed.
The needs for responsible tax practice in Developing Countries
From an ActionAid perspective the problem is a global tax system that all too often deprives developing countries of revenues, vital to fighting poverty and financing the ambitious Sustainable Development Goals. If developing countries are to provide basic public services like healthcare and education – which all too often are lacking, particularly for women and girls – then additional revenue is needed. Corporate taxes tend to be relatively more important in the Global South, therefore so too is corporate tax avoidance a more pressing concern.
KPMG, like Action Aid start from the moral imperative of tax and especially tax for the developing world. Tax and the common good cannot be separated. But its not going to be easy creating sustainable tax systems that are broad-based, that are well-funded and administrable, accounting for complexities unique to each country - and fairly serving the interest of multiple parties. It means clearly defining the roles each side has to play. Sustainability is key. Tax will be part of (but not the only factor) in creating stable development.
To address these issues and to bridge the gap, we also both believe that dialogue is critical. Tax can be hugely complex and contentious, and only through open and honest engagement can mutual understanding be achieved.
Crucially, we both see a need to push the debate forward, beyond reciting the same arguments over and over towards tangible actions and outcomes.
What might that entail?
ActionAid recognises that since no two companies are the same, nor are the tax practices of any two companies the same. So there is a need for nuance, and for bespoke approaches. That is why ActionAid works directly with companies, to promote more responsible practices that better reflect the needs of developing countries.
But in order that these efforts can be successful, there is a need for greater transparency. Only through greater openness and disclosure can civil society organisations fully understand corporate structures and the reasons for them, and the way in which companies pay tax around the world. It is for this reason that ActionAid advocates strongly for public country-by-country reporting of corporate data on revenue, profit and taxes paid. There is a limit to how meaningfully ActionAid can engage with companies without transparency, so it remains a core premise for positive dialogue.
KPMG recognises the rationale underpinning ActionAid’s call for greater corporate transparency. But it also feels that on occasion, complex tax information has been misunderstood or misused when placed in the public domain. Years of media and political scrutiny of corporate tax behaviour have brought serious and pressing issues to the fore (as well as some cases of demonstrable wrongdoing). Yet despite this attention, misrepresentations remain. We need to rebut myths around taxation if a serious debate for change is to develop.
There will always be disputes and subjectivity concerning what constitutes aggressive tax avoidance. Therefore differing interpretations of data are natural and – indeed – healthy: tax is hugely important so it’s right that it should be subject to debate. However both organisations believe that the state of debate could be improved, and further that civil society organisations and corporates alike have a role to play in promoting informed discussion.
Civil society organisations can contribute to this by recognising good practice. Whilst organisations like ActionAid are right to highlight cases of wrongdoing, this should be supplemented with endorsement of progressive action. Some companies seek to approach tax fairly and responsibly, and where this is the case civil society should recognise those efforts.
For their part, corporates should work towards greater transparency, and in doing so, they should seek to make data not just more accessible but relevant and understandable. Improving the state of public debate on tax requires a commitment not just to openness, but to accessibility. And we must all take a lead in building tax capacity.
There is another way in which business and civil society organisations can work in partnership to advance the responsible tax agenda, and that is through joint advocacy. Through joining forces and pooling our collective voices, we can influence policymakers to reform the global tax system for the better.
Speaking individually, both businesses and civil society organisations have a degree of influence. But in speaking together regarding issues on which there is consensus, we can greatly amplify our voice. Reaching consensus may require a degree of compromise on both sides, but in working together such compromises will become easier to reach.
This article is an early contribution to that end. It aims to show that whilst our respective organisations might approach the issue of tax from differing perspectives, they are both committed to catalysing positive changes to the global tax system, and to working together – wherever possible – to achieve solutions which must mean building trust, skills and capacity to tax in a sustained and fair way.
We believe it is possible to create a better and fairer global tax system, one that simultaneously encourages business whilst ensuring that developing countries can collect a fair rate of tax. Human flourishing across the globe depends on it. By working constructively together, we get a little closer to achieving that shared ambition.
Girish Menon’s experience in international development now spans 30 years: as well as his term at ActionAid India he has worked for Plan International, DfID and most recently WaterAid, where he was Deputy CEO and Director of International Programmes, responsible for 22 countries in sub-Saharan Africa and south Asia.