[World Council of Churches] An independent commission on international tax reform initiated by a coalition of organizations including the World Council of Churches (WCC) is calling for an overhaul of the global taxation system to alleviate poverty in developing nations including the Democratic Republic of Congo.
To cite one example illustrative of the current situation, the Kamoto Copper Company (KCC) – a subsidiary of Glencore, a mining and commodity trading giant – systematically recorded losses in the Democratic Republic of Congo (DRC) since 2008 despite strong production. A 2014 study conducted by Bread for All, Fastenopfer and Rights and Accountability in Development, presented at the recently concluded International Conference on Peace and Security in the DRC organized by the World Council of Churches, traced the losses to significant interest payments on debt made to five parent companies registered in tax havens. In short, though KCC registered losses in the DRC, its parent companies controlled by Glencore made considerable gains for its overseas investors.
The practice of shifting profits to offshore jurisdictions allows multinationals like Glencore to avoid paying fair taxes on profit and dividends.
As a result, according to the aforementioned study, Congolese citizens lost an estimated US$ 153.7 million from KCC alone since 2009. Such amounts could have been used to build much-needed schools, hospitals and basic infrastructure in a resource-endowed but poverty-stricken nation, bemoaned church representatives at last week’s gathering on the DRC.
The practice is legal and reflects deep flaws in the global system of taxation.
On 02 June at the 2015 Trento Economics Festival, the Independent Commission for the Reform of International Corporate Taxation (ICRICT) launched a timely declaration calling for an overhaul of the global tax system.
“This debate centres on equity…equity between capital and labor, equity between the rich and those living in poverty, as well as equity…between developed and developing countries,” said ICRICT chair José Antonio Ocampo, former United Nations (UN) under-secretary general and former minister of finance of Colombia. “International corporate tax reforms should be considered from a global public interest perspective rather than…corporate advantage.”
Key recommendations from the ICRICT include:
- Tax multinationals as single firms with developed countries imposing a minimum corporate income tax rate during the transition;
- Curb tax competition to prevent a race to the bottom;
- Increase public transparency of taxes paid by multinationals; and
- Build inclusivity into international tax cooperation by establishing an intergovernmental tax body within the UN and begin drafting a UN convention to combat abusive tax practices.
The ICRICT Declaration is as an important input to the 3rd International Conference on Financing for Development to be convened by the UN from 13 to 16 July in Addis Ababa.
Initiated by a consortium of civil society organizations including the WCC, ICRICT is composed of public leaders and economists comprising, among others, Rev. Suzanne Matale, general secretary of the Council of Churches in Zambia, and Manuel Montes, an economist at the South Center and a member of the Ecumenical Panel on a New International Financial and Economic Architecture.
“The ICRICT’s proposals aim to ensure that multinational corporations such as Glencore pay their fair share of taxes so that countries like the DRC can mobilize resources to eradicate poverty,” said Athena Peralta, consultant for the Economic and Ecological Justice Programme at the WCC. Tackling corporate tax evasion and avoidance is one of the action points identified in “Economy of Life for All Now: An Ecumenical Action Plan for a New International Financial and Economic Architecture” and the “Sao Paolo Statement: International Financial Transformation for an Economy of Life.”
Read more on the WCC website.