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Resources for public education and health eaten by global corporations

The world has enough for everybody’s need but not enough for everybody’s greed, said Mahatma Gandhi. A similar emotion evokes a new study by Education International Research Institute - Global Corporate Taxation and Resources for Quality Public Services which has shown that a fortune worth trillions of dollars lost annually due to tax evasion by multinational corporations (MNCs) if ploughed back into society is actually enough to provide for quality public services like education, health, etc. to many. Indeed there is no dearth of money to fund social goals such as the UN Millennium Development Goals and Education For All, but only if MNCs behaved in a socially responsible manner and shared their profits with others by duly paying their corporate taxes.   

The study notes that MNCs use their global presence in different countries with varied tax regimes to avoid their responsibility to contribute through fair and responsible taxation to national and community social needs and public services. The loss of public revenue due to the tax evasion and avoidance practices of MNCs has severe implications for especially countries in the Global South that have higher financial needs. In an analysis for Oxfam in 2009, it was found that at least $6.2 trillion of the wealth of developing countries was held offshore, depriving developing countries of their annual tax receipts worth $64 to $124 billion. It is believed that the extent of the losses could even outweigh the amount of $103 billion that developing countries receive every year in overseas aid.       

Taxes are integral for construction and maintenance of all societies, providing resources for national defense, police and emergency services, public education and health, infrastructure such as public roads or communications, social protection, environmental conservation, etc. Not only this, taxes derived from corporate profits have played a vital role in building societies of the 20th century which in turn ensured the continuing success of companies that contributed to their establishment. This had led to a virtuous cycle: corporations financed societies, which in turn made the corporations flourish, increasing their contributions to society, which again strengthened and enhanced corporations’ operations. However, in the last couple of decades, global corporations have allocated less and less of their profits to the communities in which they operate. MNCs have bypassed their ‘real’ and ‘complete’ corporate social responsibility by merely providing for philanthropic measures rather than contributing to government resources for provision of public services by paying fair and reasonable corporate taxes each year.

With the current economic meltdown, many governments of OECD countries are facing the pressures to downsize budget for public services due to large and larger state deficits. The very recent announcement by Governor Jerry Brown of California, USA to make about S1 billion midyear cuts to schools and social services due to the fall in the state’s revenue is just one such instance. The study suggests that for governments, the solution for facing the financial crisis does not lie in taking austerity measures in terms of reducing the public budgets, rather it lies in putting taxation on their political agenda which they have long been hesitating. Political will is needed on the part of governments to check and close the loopholes through which MNCs avoid taxations. Referring to the governments’ responsibility in ensuring fair and reasonable taxes by MNCs, Peter Waldroff, Chair of Council of Global Unions and General Secretary of Public Services International said in the study that raising taxes may not be the most attractive proposition, but cutting deeply in education, health care and other public services can also put re-election into jeopardy. It is also suggested that governments give their much overdue endorsements for global financial transaction tax which could provide considerable amount of development funds for poor countries at a time like the present where donors are cutting foreign aid budgets.

The ball is now in the governments’ court. Governments don’t need to look far. Money is there to meet the financial crunch, to provide an education to the 67 million children currently out school, good health to all and to reduce poverty by half. Only the will and the urgency to make global corporations pay their share of taxes is needed.    
 
Sources:
http://www.ei-ie.org/en/news/news_details/2024
http://download.ei-ie.org/Docs/WebDepot/Study%20on%20Global%20Corporate%20
Taxation%20and%20Resources%20for%20Quality%20Public%20Services.pdf

http://www.mydesert.com/article/20111214/NEWS04/112140305/Brown-announces-1-billion-cuts?odyssey=nav%7Chead