Here's what responsible tax looks like, charities advise multinationals

There are many steps multinationals can take towards more responsible tax practices, three charities say in a new report out this week.

Rather than highlighting what companies should stop doing, ActionAid, Christian Aid and Oxfam draw attention to how firms can act more responsibly in areas including transfer pricing, use of tax incentives and lobbying.

Within each of these areas, the charities' new report: 'Getting To Good' gives detailed examples of what more responsible tax decisions would look like, in order to bring about positive impacts for developing countries and the realisation of human rights.

For example, companies can:

• Publish country-by-country reports before being legally required to do so.

• Publish the outcome of any significant settlement with revenue authorities.

• Assess and begin to address the human rights impacts of their tax behaviour.

• Audit their use of tax incentives and reliefs on a regular basis, to ensure they are delivering investment, employment or other benefits.

In addition, the report suggests the need for a change of culture within multinationals, towards an acceptance that they can go above and beyond being legally compliant on tax, in recognition of the huge impact that their tax decisions have on the rest of society.

Christian Aid, ActionAid and Oxfam believe that domestic and international tax law reforms remain critically important, but they also recognise that such changes are painfully slow and imperfect, and that multinationals will always have multi-million dollar choices about where and how they pay tax.

The charities also highlight that responsible tax is good for businesses, helping them to mitigate reputational and other risks.

Barry Johnston, Director of Policy, Advocacy & Campaigns at ActionAid, said: "Businesses must recognise that paying a fair amount of tax is both the smart thing and the right thing to do. At its heart, the question of corporate tax avoidance is one of fairness and justice. Corporate tax avoidance is now scarcely out of the news, and many companies have faced huge reputational damage for playing fast and loose with the rules. But the real losers in this global game are those living in poverty, whose rights are denied by a lack of revenue for services like hospitals and schools while huge profits are shifted elsewhere. Alongside the urgent reforms to regulation that are required, good businesses should recognise that they too must play their part."

Matti Kohonen, Principal Adviser on the Private Sector at Christian Aid, said: "Christian Aid knows it takes courage for companies to go beyond the law, for instance by making financial details public in every country where they operate. We hope that this report will encourage them to move in the right direction. Such a shift will be welcomed as vital for tackling poverty and growing inequality in the developing world. Public opinion is changing rapidly and companies are increasingly expected to take positive action on this issue."

Penny Fowler, Head of Private Sector at Oxfam, said: "Companies and investors need to recognise that paying their fair share of tax is a human rights issue for which corporations must take responsibility, alongside such issues as labour and land rights. Until businesses adopt a more responsible approach to paying tax that goes beyond a focus on compliance and instead ensures they contribute fairly to the societies that their operations rely on, millions of vulnerable people in developing countries will continue to be deprived of the jobs, hospitals and schools which that tax revenue could help fund."

Read the report here: www.actionaid.org.uk/policy-and-research/research-and-publications