Developing countries are struggling to provide basic public services to their citizens. Citizens complain of crowded classrooms, shortages of nurses, crumbling roads, inadequate health care and governments point to their empty budgets. There is a solution to this shortage of money in poor nations. Poor nations must stop giving investors and corporations tax breaks. The money lost to corporation tax breaks could meet all the country’s health-needs, feed all the starving children, send every child to school and reach all the MDGs.

It is estimated that developing countries lose more than $138 billion a year to corporate tax breaks and tax exemptions alone.

“Big companies are doing deals to avoid paying tax on their massive profits. They’re playing developing countries off against each other to get good tax deals for them, but bad deals for the world’s poor,” ActionAid’s advocacy manager Soren Ambrose said.

Tax breaks are not even a large factor when corporations decide to invest in a country. According to an Investor Motivation Survey conducted by the World Bank, tax incentives ranked seventeenth, behind factors such as exchange rates, labor costs and transport infrastructure.

Corporations rely on public services such as infrastructure and raw material. They also rely on healthy and educated workers. It is only right that these corporations pay their contribution for the public services they rely on.

“Governments aren’t collecting the tax which is rightfully theirs. They’re openly letting big companies pay less tax. Some countries are even offering completely tax-free deals – a lose-lose for all involved, especially poor people in urgent need of services like schools and hospitals, “ said Ambrose. “In the long run, governments and companies are sabotaging the development of the skilled and healthy workforces that could lift their countries out of poverty.”

– Catherine Ulrich

Sources: Alertnet, ActionAid