Briefing for Global Campaign for Education (June 2017, published online October 2017)
Publications > Tax
Missed Opportunity: How could funds lost to tax incentives in Africa be used to fill the education finance gap?
Policy brief for ActionAid (August 2017)
How much revenue do African governments lose from providing tax incentives, such as giving companies tax holidays and exemptions on paying taxes on import duties and value added tax? And if these precious national budget resources were set aside to fund quality, public education instead, how much greater could education spending be? This brief provides figures for revenue losses from tax incentives for several African countries. It concludes that governments in sub-Saharan Africa may be losing US$38.6 billion a year, or 2.4% of their GDP, to tax incentives. This is equivalent to nearly half (47%) of their current education spending. Having a much clearer pro-poor policy for granting incentives and using some of these resources to fund education could provide a much-needed and significant boost to education budgets across Africa.
Report with Dr Bernadette O’Hare (July 2017)
This research estimates how much revenue six low income countries – of which five are in sub Saharan Africa – are losing unnecessarily from various potential revenue streams that could be used to fund public services. Developing countries can lose revenue in a variety of ways. Here we estimate how much is being lost from the following sources:
Tax avoidance by multinational companies; Providing tax incentives (for example, reductions or exemptions from the payment of corporate taxes) which constitute government ‘tax expenditure’; Not collecting taxes from a proportion of business activity in the informal sector; Corruption in the national budget; and Debt interest payments to international creditors. The research finds that revenue losses are large in all countries, which has significant implications for development. The priorities for low income countries are to end corporate tax avoidance, reduce corruption and raise tax collections. These areas are far more important than aid inflows: The six countries under analysis are losing 6.4% – 12.9% of their GDP; In most cases, this amounts to more than the combined national health and education budgets, meaning that expenditure on these areas could more than double; Revenue losses are larger than aid in two of the six countries and over 60% of the amount of aid in a further three.
Report for Oxfam (July 2017)
Curtis Research provided research for this Oxfam investigation into British consumer goods multinational, RB (Reckitt Benckiser). Big business is able to take advantage of loopholes in global tax laws and avoid tax on a massive scale. This deprives governments around the world of the money they need to tackle poverty and inequality. It means there is less for them to invest in healthcare, education and jobs. This report examines the failings of the global tax system that facilitate mass tax avoidance. It looks at one example of a multinational company that Oxfam thinks is not paying its fair share. It calls on governments and business to implement the reforms that are needed to stop MNCs from avoiding paying their fair share of tax in the future.
Report for group of NGOs led by Global Justice Now, Jubilee Debt Coalition & Health Poverty Action (May 2017)
Research for this report calculates the movement of financial resources into and out of Africa and some key costs imposed on Africa by the rest of the world. We find that the countries of Africa are collectively net creditors to the rest of the world, to the tune of $41.3 billion in 2015. Thus much more wealth is leaving the world’s most impoverished continent than is entering it. African countries received $161.6 billion in 2015 – mainly in loans, personal remittances and aid in the form of grants. Yet $203 billion was taken from Africa, either directly – mainly through corporations repatriating profits and by illegally moving money out of the continent – or by costs imposed by the rest of the world through climate change.
- African countries receive around $19 billion in aid in the form of grants but over three times that much ($68 billion) is taken out in capital flight, mainly by multinational companies deliberately misreporting the value of their imports or exports to reduce tax.
- While Africans receive $31 billion in personal remittances from overseas, multinational companies operating on the continent repatriate a similar amount ($32 billion) in profits to their home countries each year.
- African governments received $32.8 billion in loans in 2015 but paid $18 billion in debt interest and principal payments, with the overall level of debt rising rapidly.
- An estimated $29 billion a year is being stolen from Africa in illegal logging, fishing and the trade in wildlife/plants.
Report for Norwegian Church Aid (May 2017)
In 2012, the Tanzania Episcopal Conference, National Muslim Council of Tanzania and the Christian Council of Tanzania jointly published a report written by Curtis Research which estimated that Tanzania was losing revenues of between $847 million and $1.3 billion a year from a mix of tax evasion, tax incentives and capital flight. New research presented here shows that Tanzania continues to lose a vast amount of resources every year – in fact, these losses are if anything increasing. The research estimates that Tanzania is now losing around $1.83 billion a year from tax incentives, illicit capital flight, the failure to tax the informal sector and other tax evasion. The country is losing a further $1.3 billion (TShs 2.9 trillion) from corruption in the national budget, which diverts resources away from funding critical public services.
Report for ActionAid and International Commission on Financing Global Education (November 2016)
This report, part-written by Curtis Research, outlines how increased taxation in developing countries should fund public education. The task is urgent given that 121 million primary or lower secondary age children are out of school while 250 million children who are in school but not learning. Many tax incentives provided by developing country governments cause far more harm than good. First, and most importantly, they can massively reduce government revenues by removing the requirement for companies to pay fair levels of tax. Second, they can encourage corruption and secrecy when negotiated in highly discretionary ‘special deals’ with individual companies. Third, they mainly attract ‘footloose’ firms which move their investments from one country to another, and therefore do not encourage stable long term investments. Fourth, where they favour foreign investors, they can disadvantage domestic investors and deter them from entering markets or expanding. The ostensible reason for governments providing tax incentives to business is to attract foreign direct investment (FDI), yet the evidence suggests that tax incentives are not needed to attract FDI. There are four types of incentives that are particularly problematic: discretionary incentives, tax holidays, tax incentives in free trade zones and stability agreements. Developing countries are estimated to lose US$139 billion a year just from one form of tax incentive – corporate income tax exemptions. This could easily fill the annual global finance gap for basic education.
Report for Oxfam IBIS (Denmark) and other NGOs (November 2016)
This report, written with Sara Jespersen of Oxfam IBIS, finds that Development Finance Institutions (DFI) are not doing enough to avoid becoming accomplices in harmful corporate tax practices. It highlights the role DFIs should play in promoting responsible tax practices by companies. DFIs are largely failing to use their influence as investors in companies operating in developing countries to ensure that those companies restrict or eliminate their use of tax havens or to reduce the risk of corporate tax avoidance. While others have taken important steps forward. There is a particular need for DFIs to play this role, given the scale of global tax dodging, the fact that DFIs largely use public money and since DFI investments in developing countries are significantly increasing.
Report for War on Want (July 2016)
This report reveals the degree to which British companies now control Africa’s key mineral resources. It reviews the operations of all the companies listed on the London Stock Exchange (LSE) that have mining interests in Africa, focusing on key minerals and metals such as gold, platinum, diamonds, copper, oil, gas and coal. It finds that 101 companies have mining operations in 37 sub-Saharan African countries. These companies, which are mainly British, now control an identified $1.05 trillion worth of resources in Africa in just five commodities — oil, gold, diamonds, coal and platinum. Of the 101 LSE-listed companies, one quarter are incorporated in tax havens. A determination to plunder the natural resources of Africa is taking place, with the active support of the British government; this is contributing significantly to a net drain of resources from Africa, already the world’s poorest continent.
Report for ActionAid and Tax Justice Network Africa (June 2016)
In 2012, ActionAid and Tax Justice Network Africa published a report estimating that East African countries were losing revenues of up to US$2.8 billion a year by providing tax incentives. The 2012 report received – and continues to receive – widespread attention from the media and governments. This new report assesses what progress has been made since 2012 in reducing these tax incentives, and outlines mixed findings. On the one hand, governments have taken some positive steps to reduce VAT-related incentives, which are increasing tax collections and providing vital extra revenues that could be spent on providing critical services. On the other hand, they are still failing to eliminate all unnecessary tax incentives, including corporate income tax incentives given to corporations. Precise figures are impossible to provide due to a lack of transparency, but the evidence gathered suggests that four East African countries could still be losing around US$1.5 billion and possibly up to US$2 billion a year.