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1 8*9526(1*:/$&( +,-*./01$2(3*,%%*45/*)((&* 15*6)57 "#$%&'()*studying at the Al-Qudus primary school, Freetown, Sierra Leone. The taxes dodged by big business could help pay for the education of the 67 million children around the world who currently miss out. PHOTO:!!"#$%&'(")*+,'"($"(-."/*0(+%' AUBREY WADE/ACTIONAID

2 =)1'5&/21$5) =)1'5&/21$5) 1(20"3$"0'%4'(5"0$6'"7+)"%$6#-3+'0"-4'",$,)+3)"(8'+4" (-.'0"79"08+:(+3)"#4$;(0"+3($"(-."8-<'30=" Tax dodging is a massive drain on resources in a world where one billion people go hungry and 67 million children don t go to school. Every day the money lost through clever accountancy tricks and secrecy costs ordinary people hundreds of millions of pounds. To have a serious impact on poverty, developing countries need tax revenue to invest in essential public services such as teachers, hospitals, roads and water. Tax justice could help transform the lives of billions of people poor countries would become less dependent on aid and break free from the cycle of poverty. In the last few years campaigners have made huge strides towards achieving tax justice. Around the world people have been raising their voices to say: If we pay our taxes why aren t big companies paying theirs? In this guide you ll find everything you need to know about tax dodging by multinationals, how they get away with it, and what we can all do to tackle it. C(D(%59$):* 25/)1'$(0*%50(* 1#'((*1$@(0*@5'(* 15*1,-*#,D()0* 1#,)*1#(4*'(2($D(* $)*,$&*(,2#*4(,' >/'/)*?(:/@*is a teacher at Naora Primary School, Bangladesh. There are over 400 children and only nine teachers. +5*$@9'5D(*5/'* (&/2,1$5)*0401(@* 7(*)((&*@5'(* 1(,2#('0A >/'/)*?(:/@ Money from tax revenue can help fund vitally needed education for the 67 million children who miss out. >$+3"(8'"(-."/*0(+%'"%-6#-+)3"-(,21$5),$&A5':A/6B1,-./01$2( ;!"#$%&'(")*+,'"($"(-."/*0(+%' PHOTO: G.M.B. AKASH/ACTIONAID!"#$%&'(")*+,'"($"(-."/*0(+%' <

3 K#,1*$0*1,-*&5&:$):J collecting petition signatures, calling on the government to close tax loopholes. PHOTO: ACTIONAID (8'+4"(-."7+AA0"+0"79"08+:(+3)"#4$;(0"$*("$:"(8'" %$*3(49"(8'9"-4'")'3'4-(',"+3B"-3,"+3($"-"(-." 8-<'3="?8'9"%-3"(8'3",'%A-4'"A'00"#4$;("+3"(8'" #A-%'"(8'9"-%(*-AA9",$"7*0+3'00"-3,"6$4'"#4$;("+3" (8'"(-."8-<'3= Tax havens not only offer companies low or even zero corporation tax rates, they also provide a veil of secrecy that means proper scrutiny of the company is difficult and often impossible. The scale of tax haven use is massive. ActionAid research revealed that 98 of the UK s 100 biggest companies listed on the London Stock Exchange use tax havens. C8+:(9"7*0+3'00 Most big multinational companies have extremely complex structures, with different subsidiaries based in different countries. One part of the business might supply the raw materials, which will then be processed in another country but the patent owned somewhere else. Instead of paying tax where the real business takes place, profits are moved between different parts of the company. At least 40% of all international trade takes place within multinational companies, providing ample opportunity for moving profits around. There are international rules that try to regulate this trading, known as transfer pricing 821$5)8$&*2,@9,$:)('0*at the G20 meeting in Cannes calling for international action to crack down on tax dodging. PHOTO: MAÍRA MARTINS/ACTIONAID rules, but they are often unfair and not always applied. Set in Paris by the OECD, a club of rich countries, they don t allow developing countries to keep their fair share of taxable profits. To make matters worse, they re very complex to apply and require information that simply isn t available in much of the developing world. D4-%&+3)",$@3"%-3"7'" -"#4$7A'6 The way tax is regulated internationally and the resources tax inspectors have at their disposal has a massive impact on whether developing countries get the revenue that is rightfully theirs. Eighty two of the UK s hundred biggest companies have operations in developing countries. Expensive accountants and lawyers are able to find loopholes in the system, running rings around developing countries, which lose billions in vitally needed tax revenues each year. +,-*(D,0$5)*D0A*,D5$&,)2(G*7#,1H0* 1#(*&$II('()2(J Tax avoidance is when companies or individuals use complex but legal loopholes in the tax system to artificially lower their bills. George Osborne recently branded aggressive tax avoidance morally repugnant. Tax evasion is illegal for example declaring false sums on a tax return. E!"#$%&'(")*+,'"($"(-."/*0(+%'!"#$%&'(")*+,'"($"(-."/*0(+%' F

4 P8?Q$%%(' Q,'1,*T/11:'5&1G*inside her food and drink stall in Accra, Ghana. PHOTO: JANE HAHN/ACTIONAID R57*S'5%02#*57)('* P8?Q$%%('*&5&:(0*$10* 1,-(0*$)*8I'$2, $<'4"GHH"74-3,0"+3%A*,+3)"I4$A0%8B"J'4$3+"-3," F+AA'4="?8'"%$6#-3920"-33*-A"#4$;(0"-4'"KG"7+AA+$3B" 0$"9$*2,"(8+3&"+("%$*A,"-::$4,"($"#-9"+(0"(-.'0=" =*&5)H1*U(%$(D(*$1A*K(* V15*%526*5/'*01,%%0W* 7$1#*,*9,&%526A Q,'1,*T/11:'5&1 But by using tax loopholes it s costing African countries an estimated 20 million a year in lost taxes, enough to pay for the education of 250,000 children. Amongst other subsidiaries, SABMiller owns Accra Brewery in Ghana, which pumps out 29 million worth of beer a year. As the beer is produced, bottled and labelled in Ghana, logically the company would pay corporate income tax there too, yet it did so in only one of the four years from In the shadow of Accra brewery, small trader Marta Luttgrodt sells beer in her kiosk, working 12 hours a day to support two children. Incredibly, in two years Marta paid more income tax than the giant multinational next door. 821$5)8$&*9'51(01G*ten green bottles take on SABMiller. N!"#$%&'(")*+,'"($"(-."/*0(+%' PHOTO: MARK CHILVERS/ACTIONAID!"#$%&'(")*+,'"($"(-."/*0(+%' O

5 0#$I1(&*5/1*5I*8I'$2,* $)15*1,-*#,D()0*U4* P8?Q$%%(' >(1#('%,)&0 P7$1Z('%,)& Q,/'$1$/0 This fundamental injustice happens through a range of transactions between different bits of the company. For example, many of the brands of local African beer that SABMiller sells in Africa are owned in the Netherlands. African subsidiaries of SABMiller pay millions in royalties to the Dutch bits of SABMiller for the use of these local brands. So a large chunk of the profits are officially made in the Netherlands, rather than in the countries where the beer is brewed, sold and drunk. The estimated loss in taxes is 10 million per year. In another dodge SABMiller s African and Indian subsidiaries pay massive management service fees to sister companies in European tax havens such as Switzerland, where tax rates are lower. The estimated tax loss is 9.5 million a year. Both of these dodges are examples of how companies are able to shift profits from one country to another within existing international tax rules. While this isn t illegal, and is designed to comply with the letter of the law, we and many others think it s highly immoral. In response to ActionAid s campaign, African tax officials have begun to look again for ways to get tough on tax dodging companies, starting by negotiating a new tax treaty that will let them work together on investigations. ^5*K55%I campaigns outside the London office of SABMiller. PHOTO: HENRY NICHOLLS/ACTIONAID X!"#$%&'(")*+,'"($"(-."/*0(+%'!"#$%&'(")*+,'"($"(-."/*0(+%' Y

6 a market stall where she sells fish and vegetables, next to the Glencore owned mine. PHOTO: JASON LARKIN/ACTIONAID $3",'<'A$#+3)"%$*3(4+'0="N'0#+('"4+%8"6+3'4-A"4'0$*4%'0B"(@$"+3" 0#'3,0"A'00"#'4"%8+A,"$3"',*%-(+$3"(8-3"-39"$(8'4"%$*3(49"+3" 0$*(8'43"!:4+%-= S%()25'(*25/%&*U(* [ON*@$%%$5)** $)*%501*1,-A* Several large multinational companies do business in Zambia. But many are facing big questions about their tax contribution or lack of it including SABMiller. Huge public attention in Zambia has also focused on FTSE-listed mining giant Glencore s tax affairs in the country. A draft leaked audit report on the Mopani copper mine, which Glencore disputes, accused them of massive tax dodging. Were this report accurate, we estimate that the cost to Zambia would be as much as 76 million in one year. This is more than the whole country receives in UK aid each year. Following campaigning by ActionAid Zambia partner organisation Centre for Trade and Policy Development, the Zambian government committed to reclaiming up to US$1 billion of outstanding tax from the mining companies. "#$%&'()*9%,4 in the shadow of the Mopani copper mine. PHOTO: JASON LARKIN/ACTIONAID!_!"#$%&'(")*+,'"($"(-."/*0(+%'!"#$%&'(")*+,'"($"(-."/*0(+%'!!

7 Q,6$):*,*&$II('()2( +#(*&$II('()2(*1,-** E9",$+3)"(8+0"+3"$(8'4"%$*3(4+'0"$*4")$<'436'3(" %-3"8'A#":*3,"A$3)"('46"0$A*(+$30"($"#$<'4(9= Many authorities simply don t have the capacity or the funds to raise the tax revenue that their countries need. When they are strengthened the results are dramatic. The Rwandan Revenue Authority was set up in 1998 with a grant of 20 million from the UK government. They now collect that amount every four weeks. Government spending on water, health and education has expanded massively, generating incredible results. From 1994 to 2006, poverty dropped from 74% of the population to 56%. Almost all children now get a primary education. Rwanda even has a National Taxpayers Day, celebrating the positive contribution to the country that taxpayers make. Supporting tax authorities in developing countries is a crucial part of ending poverty. +,-,1$5)*$0*,*@,.5'* U/$%&$):*U%526*I5'* 5/'*&(D(%59@()1A** Q,'4*?,$)(G Commissioner General of Rwanda Revenue Authorities "#$%&'()*01/&4$): at a school Nyamurimirwa, Rwanda.!;!"#$%&'(")*+,'"($"(-."/*0(+%' PHOTO: GREG FUNNELL/ACTIONAID!"#$%&'(")*+,'"($"(-."/*0(+%'!<

8 R57*2,)*7(*1,26%(* 1,-*&5&:$):J* F*A(+3-(+$3-A"(-.",$,)+3)"+0"8*)'B"-3,"-::'%(0" '<'49"0+3)A'"$3'"$:"*0="?8'"6$3'9"A$0("%$*A,"#-9" :$4"<+(-A"0'4<+%'0"+3",'<'A$#+3)"%$*3(4+'0"0*%8" -0"8'-A(8"-3,"',*%-(+$3B"7*("+30('-,"+(20"7'+3)" 0+#8$3',"$::"+3($"%$6#-39"#4$;(0= Ultimately, the international rules have to change which will take time. Together with this, the veil of secrecy that surrounds tax havens and company accounts must be lifted. Greater transparency would deter a lot of tax dodging from happening in the first place, and it would also enable both governments and the public to hold companies to account. Because the companies who dodge their taxes currently have so much power, the only way we can achieve change is by building a global movement to push corporations to come clean and national governments to crack down on tax dodging. We ve already made amazing progress and much more is possible. We all have a role to play in making tax justice a reality. K(*,%%*#,D(*15* 25@(*15:(1#('*15* &5*05@(1#$):G*,)&* 2,@9,$:)$):*$0*1#(* U(01*7,4*U(2,/0(* P1,)%(4G ActionAid supporter S8-("%-3"$*4" )$<'436'3(",$M" Take responsibility for multinationals based in the UK by ensuring that Britain s tax rules make it harder, not easier, for them to dodge taxes in developing countries. Increase pressure internationally at bodies such as the G20 to tackle tax havens, and make companies publish a basic set of accounts in every country in which they operate. Provide aid money to help developing countries strengthen their tax authorities. S8-(",$"%$6#-3+'0" 3'',"($",$M" All companies should pay their taxes in the countries in which they do business. They must become responsible about their tax affairs and: Stop using tax havens to siphon profits out of developing countries. Make tackling tax avoidance top priority in their corporate social responsibility programme, and report transparently to shareholders and the public. Stop the secrecy make their affairs more transparent by publishing a basic set of accounts in every country they work in including tax havens. S8-("%-3"9$*",$M" The government will only crack down and corporations only change their tune if people take action. Around the world the campaign for tax justice is growing, from people in Zambia forcing their government to reclaim lost revenue, to UK campaigners lobbying their MPs. I'("+3<$A<',"@+(8" (8'"%-6#-+)3":$4"(-." /*0(+%'"($,-9"-3,"6-&'" 9$*4"<$+%'"8'-4,= +,6(*,21$5)** 777A,21$5),$&A5':A/6B* 1,-./01$2(A*!E!"#$%&'(")*+,'"($"(-."/*0(+%' PHOTO: KRISTIAN BUUS/ACTIONAID!"#$%&'(")*+,'"($"(-."/*0(+%'!F

9 b$)&*5/1*1#(*%,1(01* )(70*,)&*1,6(*,21$5)*15&,4c T+0+("777A,21$5),$&A5':A/6B1,-./01$2( ActionAid Chataway House, Leach Road Chard, Somerset TA20 1FR Call: Twitter: Facebook: =)2'(,0(&*1,-* '(D()/(*$0*1#(*'551* 25/)1'4*7$%%*:'57*,)&*7(*)((&*15* )/'1/'(*$1*2,'(I/%%4A 8$&,*M$,):$G Country Director of ActionAid Tanzania Registered charity number !N!"#$%&'(")*+,'"($"(-."/*0(+%'