Action Aid: Using Tax Research methodology to show how every child could get an education

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Action Aid issued a press release this morning saying:

ActionAid welcomes Gordon Brown's initiative to reduce world poverty - the Call to Action - and recognises that corporations must be involved in the challenge. But the charity says that the UK and other governments are missing a crucial opportunity to raise billions of dollars for the world's poorest people by not tightening corporate tax laws.

On the day the prime minister asks leading businesses to join him in the fight to end extreme poverty by 2015, a new ActionAid report charges that loss of potential tax revenue, for example, through legal tax avoidance schemes by multinational companies, is proving to be a critical issue for developing countries.

Tax is the most reliable and consistent income for governments, used to provide health and education services, and to invest in the infrastructure vital for socio-economic growth. Yet ActionAid's research suggests a possible shortfall of billions of dollars in corporate tax revenue for the developing world.

ActionAid took a sample of 14 UK and US-based companies, all of which support the Business Call to Action, launching today, 6 May. The charity used these companies' published accounts to estimate how much tax it would expect them to pay worldwide if their profits were taxed at the corporate tax rate in their home countries.

ActionAid has estimated what the tax liabilities of the 14 companies would be if their declared profits, excluding goodwill charges, were taxed in this way.

The gap between this hypothetical tax bill and the tax actually paid averaged out at $6.3 billion a year, enough to ensure that every child in the world who is not currently receiving a formal primary education gets into school.

ActionAid wants to see loopholes closed, and more information in company accounts so that it is easier to identify what multinational companies are doing to reduce their tax bills.

I'm delighted to have helped in the production of this report, and to have provided the methodology on which it is based.

But note again what it says: just 14 companies paying tax at the rate expected of them could provide enough to ensure that every child in the world who is not currently receiving a formal primary education gets into school.

Now it's time for the companies coat-tailing Gordon Brown today to say why they aren't paying. Because it's clear that some of those surveyed are seasoned tax avoiders.

It was notable how Goldman Sachs avoided the challenge on this morning's Today programme. As I've already said today: hiding from the truth will not make it go away, although in fairness (and I know the detailed numbers) they're not the worst culprit, by far.