Wednesday, December 01, 2010

Sometimes Aid is Just Playing Fair

Today Richard Brooks wrote an article in The Guardian arguing that many corporations use tax loop-holes in order to sell their product in developing nations without paying the requisite taxes. This is old news in the United States, where lawyers are paid millions of dollars to file the proper paperwork to save corporations even more money. However, this is literally a matter of life and death in Africa, where this money is desperately needed for schools, vaccines, and food.

Much of Africa is bound by international trade agreements that were imposed upon them after World War II in exchange for developmental aid, which means they can't get rid of these corporations. Basically, these agreements forced countries to lower their taxes, allow corporate investment, and reduce social programs. This, combined with the tax avoidance schemes of the corporation, allows these corporations to expand their markets at little cost or investment while avoiding the burden of developing the infrastructure for African nations to develop properly.

In essence, these nations are trapped. They can't raise taxes to provide the necessary goods and services for their people, they can't kick the corporations out, and they are forced to rely on international aid rather than a sound and working governmental system.

Brooks believes that corporations should adopt tax regulations as part of their corporate social responsibility mantra, for any corporation that exploits a nation's tax code, particularly a developing nation's tax code, is exploiting the millions of people within that nation. Paying the correct taxes may be seen as international aid, but I prefer to view it as playing fair.

-Corey Cox

SOURCE: The Guardian