Case Studies

Tax justice campaigners in Europe, includingTax Justice Network, Eurodad, Christian Aid, CCFD, MISEREOR and ActionAid, have been pushing for G20 governments to address the issue of transfer pricing abuse.The financial crisis of 2008 created an impetus for change in OECD countries and created an opportunity for NGOs and others to introduce the development impacts of financial secrecy, calling on world leaders to address the problem.The G20 committed to developing proposals to ensure that developing countries would benefit from the new cooperative tax environment.52 The campaign has a real chance of success, with the EU and the OECD recognising the need to address the problem and appearing to take steps to do so.

When negotiations for EPAs started in 2002, civil society across ACP states and in Europe got organised and launched a campaign to ‘Stop EPAs’.The concerns with the proposed agreements included the predicted impacts on agriculture, industry and jobs – as countries would be forced to compete with European imports – as well as the ways in which EPAs would constrain governments from regulating their economies in the interest of development and poverty reduction. In addition, civil society and governments have been concerned that EPAs would deprive ACP countries of important tax income, without any guarantees that these losses would be compensated through alternative revenue streams.The EU has argued that the gap in revenue can be filled through aid in the short term, yet there are no guarantees that additional finance will be made available in a way that does not divert resources away from other important development programmes. Most worryingly, governments would be sacrificing a sustainable source of finance that can be generated year on year, for an increased dependency on EU development assistance that is likely to be short term if it even materialises. When EPA campaigners in Europe have raised this issue with European governments and in the European Parliament, it has been met with concern, as even those who believe in the benefits of free trade agreements tend to recognise that countries need sustainable tax income. Highlighting this issue has been one entry point for getting decision-makers to listen to the broader concerns about EPAs. Reference no.45

In the mid-2000s, the Philippine government began an aggressive push to develop the country’s mining sector.The government sees the country’s abundant mineral wealth, still largely buried underground, as potentially driving economic growth and sustaining it at a high level. The government has provided a number of fiscal incentives, including income tax holidays, in order to attract investors into the sector. Research from Action for Economic Reforms conducted in 2009 estimates that in 2004 foregone revenues as a result of these tax breaks ranged from US$66.8 million to US$244.2 million, which is 80 to 300 per cent of actual tax collections for the same year. If the highest estimate is used, foregone revenues from mining in 2004 would have amounted to 5.68 per cent of the national deficit.This is despite evidence that the determining factors for mining investors are the quality of minerals in the Philippines and their current prices, not the tax breaks, suggesting that the investments would have come anyway. 41 The share of the total tax take going to local government has also been steadily declining. It is difficult to know the reasons for the decline, but one possible explanation is that the mining companies have been withholding payments to local government units as mining’s fortune has waned. For instance, the Marinduque Council for Environmental Concerns reports that Marcopper owes the provincial government more than US$20 million of unpaid real property taxes. Mining companies in ancestral domain lands also have a patchy record in the payment of royalties to indigenous peoples. Reference no.40

In Zambia, mining development agreements were negotiated with private mining investors who took over copper mines after the privatisation of the Zambian copper industry in 1998.They offered huge tax exemptions to mining companies – including setting royalty rates at 0.6 per cent and corporate income tax at 25 per cent, instead of the 3 per cent royalties and 30 per cent corporate tax specified in the Mining Act. Despite booming international copper prices between 2003 and 2008, these tax breaks have drained government coffers of much-needed revenue for development spending. In 2004, for example, the government collected only US$8 million in tax and royalty revenue from the copper mining industry. In 1992, a year when copper production and international copper prices were at similar levels to those in 2004, budget revenue from taxes and royalties was US$200 million, in large part due to higher tax collection from the mines. Civil society actors in Zambia, including the then Civil SocietyTrade Network of Zambia (CSTNZ), churches and trade unions, took up this issue.They published research reports, engaged parliamentarians and the media and raised the level of debate in the country on the issue of tax exemptions in the mining sector. Partly as a result of this successful civil society lobbying and campaigning, in 2008 the government decided to outlaw the special tax breaks granted to copper mining companies in the mining development agreements, requiring the companies to instead revert to paying the 3 per cent stipulated in the law. A special windfall tax was also introduced by the government, but it dropped this a year later under pressure from the mining companies, partly in response to the huge drop in international copper prices. While this setback reduced the overall tax revenue paid by the mining companies, in 2009 the finance minister reported…

In India, SEZs are being set up across the country since legislation was passed in 2005. Activists in India have protested against the SEZs because they say that farmers are being forced off their land, with little or no compensation, to make way for MNCs building factories and industrial parks. In addition to these problems, the excessive tax breaks offered by the SEZs deprive the government of revenue that could be used for social spending. Companies operating in the SEZs get total tax exemption for the first five years, 50 per cent for the next two years and up to 50 per cent exemptions on profits that are reinvested for another three years. The Indian Ministry of Finance estimates that in 2008/09, foregone corporate income taxes amounted to 69,000 Crore Rupees (approximately US$15 billion), as a result of tax exemptions in SEZs as well as other corporate tax deductions. Jayati Ghosh, professor of economics at Jawaharlal Nehru University and director of International Development Economics Associates, says: ‘People are rightly upset about the land-grabbing that is going on for SEZs. But we have to face the reality that there is going to be change in land use as India develops. What is important is how you compensate and rehabilitate those people who were on the land. ...The real issue is that these tax concessions are obscene. Why should companies in SEZs pay no tax, while in India we still don’t have money for universal schooling? We spend only 4 per cent of GDP on education, instead of the aimed-for 6 per cent. If we had full payment of existing taxes we would have enough money to properly educate our children or for a public health centre in every village. ...To give up such a huge amount of government resources is of…

In October 2010, the UK’s coalition government announced swinging cuts to government budgets and public sector jobs. In response, many campaigners pointed the finger at the government for cutting services and jobs while letting the banks pay bonuses and certain private sector companies avoid billions in tax, as they saw it. One group of campaigners – loosely connected and mobilised entirely through social networking sites and mobile phones – selected two campaign targets well known to UK consumers: Vodafone and Sir Philip Green, the owner of Arcadia which includes many of the UK’s leading clothes retailers. Taking to the streets with `tax dodgers’ placards, they organised sit-ins, pickets, flash mobs, and even superglued the main doors of a big clothes shop on London’s Oxford Street. Although only a relatively small group of protestors was involved, this direct action attracted huge media attention, including the financial press. Early evidence suggests that these protests – the first such protests on British streets against perceived corporate tax dodging – have sent shock waves through the private sector.

Christian Aid has been campaigning to raise awareness of the billions lost to developing countries from tax evasion and avoidance by unscrupulous companies. The campaign calls on the International Accounting Standards Board (IASB) to introduce an international country-by-country reporting standard that requires firms to report the profits made and taxes paid in every country they operate in.The IASB is a little-known, but very powerful, body based in the UK that devises the rules covering how corporations should produce their annual accounts. More than 100 governments worldwide tend to rubber-stamp its findings into law. The IASB is part-funded by the ‘Big Four’ accountancy firms – PricewaterhouseCoopers, Deloitte, Ernest &Young and KPMG. In 2009, Christian Aid decided to directly target the Big Four with a postcard and email campaign.There is evidence to suggest that this had a significant impact, but more pressure was needed.To increase the campaign’s momentum, Christian Aid decided to target the clients of the accountancy firms – the big names in the private sector. It was hoped that their support would make it almost impossible for the IASB and the accountancy firms to say ‘no’ to country-by-country reporting. In 2010, Christian Aid contacted the CEOs of all the 100 biggest companies registered in the UK (the FTSE 100 firms), asking them to complete a confidential online survey on country-by-country reporting. Christian Aid campaigners sent ‘reminder’ emails, so that many companies did eventually respond. However, very few companies responded in support of country-by-country reporting. The campaign has now decided to engage supporters with four FTSE companies that are well-known brands in the UK and which have subsidiaries in developing countries. Each of the four companies selected is audited by a different one of the Big Four accountancy firms. In the next stages, the campaign will be using a number of…

In 2010 ActionAid undertook extensive and detailed research into the operations of one multinational company (SABMiller) and its operations in six African countries – specifically zeroing in on one African country (Ghana). Using published financial information, interviews with government officials and undercover research, ActionAid sought to show how the world’s second-largest beer company was avoiding tax in Africa. It published a report of its findings23 which received media coverage in the UK and internationally.The report called on SABMiller to take a responsible approach to tax, understand and disclose the impact of tax planning, and be more transparent about financial information.To accompany the report, ActionAid produced eye-catching campaign materials bearing a simple slogan (for example `SchtopTax Dodging’ beer mats playing on the name of a SABMiller beer) and launched an email action on their website.To capture the public’s imagination, ActionAid also injected a human element to the story.They introduced campaigners, for example, to Marta Luttgrodt who runs a small beer stall in the shadow of the brewery that produces the beer and pays a flat US$47 a year in tax while the brewery next door owned by a subsidiary of SABMiller pays no tax at all. At the time of writing, it was too early to say what impact this campaign will have had on SABMiller. Although the company reacted negatively to ActionAid’s report, a negative reaction does not mean that the report will have had no impact. Beyond SABMiller specifically, it is likely that the report will impact on the private sector generally in some way, as other companies will be concerned to avoid a similar targeted investigation of their own operations. Consequently, it is conceivable that the ActionAid investigation into one company may contribute to a change in thinking on tax and corporate social responsibility among UK-listed multinationals in…

In 2007, UK NGOs ACTSA, Christian Aid and SCIAF published the joint report Undermining Development? – Copper Mining in Zambia, which questioned theVedanta mining company's corporate social responsibility record.This was followed in early 2008 by an email campaign asking Vedanta's chief executive officer (CEO) to ensure that its Zambian subsidiary Konkola Copper Mines would not oppose the government's new mining tax regime, which required companies operating in the country to pay fairer levels of taxes and royalties. Thousands of postcards and emails were also sent to Standard Life Investments, one of Vedanta's biggest investors at the time. This campaigning resulted in a meeting between ACTSA, Christian Aid and SCIAF representatives and Vedanta's CEO. Several days after this meeting, Vedanta came out in public to confirm that it would not challenge the new tax measures, which was critical for Zambia as its subsidiary Konkola accounted for around 50 per cent of copper production in the country at that time.The combination of public pressure and private lobbying was hugely effective in this case.

In March 2009, ahead of the G20 summit in London in April, European civil society networks – including the Tax Justice Network, Attac France and Attac Jersey, Christian Aid and BankTrack – organised a campaigning event on the island of Jersey. Jersey is known as a secrecy jurisdiction because it doesn’t readily provide information for foreign governments who suspect that tax evasion is taking place within its banking system. It is also referred to as a tax haven because it provides low tax for both resident and non-resident savings and other assets. On the first evening, a public meeting was organised in the parish hall to discuss the effects of tax havens on poverty, the perils of dictators’ secret bank accounts, and the links between financial secrecy and the financial crisis. Political and business representatives were invited, including the chief minister, senators and councillors. One MP came and much of what he said supported the campaign.This gave the campaign more political credibility. The following day, a walking tour of different banks was organised, in the tradition of historical walks for tourists common in Britain. Representatives from the media were invited to attend.The tour stopped in front of each bank, with participants speaking about the campaign in their own language to the national media. Representatives from both the French and British media attended the event in great numbers. The media and activists beyond Jersey were kept up to date with live blogging and aTwitter channel. The speeches were also recorded on video, checked for libel, and put onYouTube for public viewing. The combination of a public event, walking tour, media work, and internet-based campaigning was what provided a successful campaigning event.