Dropping Tax Breaks Will End Poverty
July 12, 2013 International Tax Cooperation
JOHANNESBURG – Developing countries are actively slowing down their own economic growth by offering excessive tax allowances to multinational businesses.
Late last week the international development organisation ActionAid released a statement showing that tax breaks offered by developing countries to multinational businesses is costing a total over USD 138 billion per year in foregone tax revenues.
According to ActionAid, ending corporate tax breaks would save enough revenues to provide schooling for more than 57 million children, to improve healthcare, to boost agricultural development, and to eradicate poverty.
Explaining the impact of the widespread use of tax breaks in developing countries, the Advocacy Manager of ActionAid Soren Ambrose said that governments around the world are actively competing with each other to attract more foreign investment by offering overly generous tax breaks, in some cases even going so far as to excuse multinational operations from any payment obligations.
In the statement ActionAid called for the governments of developing countries to immediately refrain from using tax breaks to attract foreign investment, citing recent studies which have shown that dropping the allowances would not deter investors, as such preferential treatment is a minor concern for investors when choosing a destination country.
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