Lack of tax revenue can create ‘failing states’, warns Dr. Rowan Williams

By agency reporter
October 23, 2015

Poor countries which are unable to collect enough tax to fund public services risk becoming ‘failing states’, Christian Aid Chair Dr Rowan Williams warned at a tax debate organised by the Confederation of British Industry on 20 October.

Addressing the audience at University College London alongside fellow panellists from the CBI, ActionAid and Lloyds Banking Group, he asked: “How does business not simply create wealth in the abstract but how does it create independence, autonomy, creativity in society?”

He added: “If the tax regimes of developing nations economies’ are not adequate to provide an infrastructure, a support system health, education and so forth, then what you will eventually have is more and more failing states which are in fact less and less friendly and constructive environments for business. And you will have increasing levels of dependency and desperation.”

Dr Williams called on companies to practice ‘proactive transparency’ and said that this should include sharing relevant information with the tax authorities of developing countries, as well as those in the rich countries where they are based.

In addition, he called for consideration of whether corporate tax incentives were justified. There should be “some sort of measure, especially for developing economies, of whether tax breaks, incentives and deals with government are justified by the results they produce in terms of decreasing dependence and increasing opportunity and creativity within the nation, entrepreneurship and all that goes with it,” he argued.

A company’s decisions about its tax practices are strategic, he argued ‘not simply in terms of its own development but in terms of its credibility and its participation in the ongoing, the unfolding economic life of a society. It’s on that ongoing economic life of a society that its legitimacy will eventually depend. So strategy is not created in a sort of business-shaped silo.”

Dr Williams also warned against a short-termist focus on profit: “I spent a bit of time a few years ago in Papua New Guinea, where it just sometimes seemed that past governments have been wholly-owned subsidiaries of various large international concerns.

"The result of course is that the collapse of governments, the drainage of energy from civil society, the reduction of provision of hospitals, schools and so forth. I saw hospitals which had been closed and schools that had been shut up because of this very narrow, short-term tactical concentration on profit, at the expense of the strategic and moral thinking forward about how we actually generate a generative society.”

In response to a question from a member of the audience at the debate, he warned against consumer boycotts, saying they were almost always “very blunt instruments” which could put jobs at risk and which were decreasingly effective, the more they were used.

However, Dr Williams added that he would be happy to hand out leaflets at Starbucks and to write to the company about tax, saying: “this is the problem, what are you going to do about it?”

In a comment on the multinational tax reform proposals recently unveiled by the OECD (Organisation for Economic Co-operation and Development), Dr Williams said that while it was a start, a great deal of work remained to be done, especially in relation to the proposals’ application in developing countries.

* Christian Aid


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