International tax dodging exposes 'two-handedness' of EU overseas policies

The EU's incoherent tax dodging approach enables transnational corporations to exploit developing countries for billions each year, writes Joanna Maycock.

By Joanna Maycock

08 Oct 2013

It goes without saying that €74bn could go a long way in some of the poorest parts of the world to finance basic services like sanitation, education and healthcare.

Yet as our new report on the impacts of EU policies overseas published last month shows, the EU's incoherent approach to tax dodging enable its own companies and transnational corporations off the hook, costing developing countries billions each year.

"The relationship of the EU with the developing world is still marked by a 'give with one hand and take with the other approach', with an end balance largely in favour of the EU"

A staggering €632bn was lost from developing countries in 2010 alone through illicit financial flows. This is 13 times the amount that EU and its member states spent on development aid in 2012.

The relationship of the EU with the developing world is still marked by a 'give with one hand and take with the other approach', with an end balance largely in favour of the EU.

This lack of 'policy coherence for development' - something which the EU is committed to under the Lisbon treaty - means that a lot of the good work done by the EU to eradicate poverty is being undermined at the same time by other policies, which negatively affect developing countries' development potential.

In one case, we find that a Zambian market seller is paying 90 times more corporate tax relative to her income than the EU sugar company - Associated British Foods - whose product she sells.

And the problem is not just overseas. The EU commission estimates that €1 trillion is lost each to tax evasion within Europe. That's the same amount spent on healthcare across the entire EU in 2008.

Tax collection, especially in developing countries, is an essential condition to finance essential social services, which ultimately help people to realise their basic rights. Some are calling this progressive taxes, progressively spent.

The fact is that this enormous loss of money at home and overseas is caused by the very same lack of adequate regulation and political will that has been permitting some companies to behave in such a way for years. This also reveals a failure to deliver on the EU treaty's obligation regarding policy coherence for development.

EU energy, trade, climate change and natural resources policies are also having negative effects, where developing countries are being used as resource hubs for the EU's consumption demands, often losing out on tax revenues along the way.

In the run up to the 2014 EU elections, over 2000 member organisations of Concord will be mobilising their constituencies in 27 countries to call on the EU to guarantee fair policies and to stop this outdated approach.

Read the most recent articles written by Joanna Maycock - EU needs wake-up call on gender equality


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