What does a healthcare centre in Uganda have to do with the Panama Papers?
On the edge of Lake Albert in the Rwangara district in Uganda you’ll find a healthcare centre supported by Save the Children. For the people of that area it’s a lifeline – their closest place to see a doctor when they’re ill and a safe place for women to give birth. But its remit is huge –an astonishing 24,000 people who come from miles around – sometimes walking for the best part of a day – to access the only service on offer. So while it is something, much, much more is needed to reach acceptable levels of health coverage.
Meanwhile, on the other side of the world, a leak of secret documents – the ‘Panama papers’ – has shown us the lengths to which very wealthy people will go to in order to protect their wealth, using complicated avoidance structures and the secrecy that offshore tax havens provide to shield them from paying their fair share of tax.
What does a healthcare centre in Uganda have to do with the Panama Papers? Tax avoidance means that governments have less money to spend on the vital public services that children need, such as schools and hospitals. In turn, that means there aren’t enough health centres like the one by Lake Albert.
It has been reported that energy company Heritage Oil, which is based in Jersey, instructed law firm Mossack Fonseca to transfer its company’s registration from the Bahamas to Mauritius in order to avoid tax when they realised the sale of an oil field in Uganda would result in a tax bill of $400 million from the Ugandan government. $400 million: that’s 14% of Uganda’s total tax take last year. And more than the entire Ugandan health budget.
In a country where 66 out of 1,000 Ugandan babies and toddlers die before their 5th birthday, tax revenues really can mean the difference between life and death.
Governments of poorer countries collect much less tax than richer countries do, about 10–20% of their gross domestic product, compared with 30-40% with wealthier nations. The amount of tax a government collects is the amount of money it has to spend on healthcare, education and social protection. If there’s not enough money coming in then these essential services simply don’t exist. People have no choice but to try to survive without them.
The decision to avoid paying tax directly affects those who have the least. Paying tax is part of a social contract built on trust – everyone pays in their fair share and then everyone benefits according to their need. However, for some, it seems that this contract is an optional extra.
The UK is in a special position to tackle this issue head on. The UK’s relationship with the Crown Dependencies and Overseas Territories – many of which have been prominently cited in the Panama Papers – means it can require them to set up public registries. And then the whole world – including Ugandan families – can see who really owns and benefits from a company’s profits.
In 2013, at the G8 summit, David Cameron called for a global crackdown on offshore tax havens. He secured a commitment from the Crown Dependencies and Overseas Territories to consult on creating ways for the public to see who really owns and benefits from a company. If they need a hand figuring out the best way to do it, the UK is well-placed to help out. In June this year the UK will become the first member of the G20 to establish a public central registry of company beneficial ownership information. Some important steps have been taken by the UK government in this area and we must ensure that others follow.
The timing could not be more perfect. Next month, David Cameron will hold an anti-corruption summit – the first of its kind. With the world watching, the UK could be the country that ends the secrecy that tax havens rely on. The Prime Minister even has the support of high-profile business leaders who, in a recent letter to the Financial Times, called for the summit to agree that “the public should know who owns and profits from companies, trusts and other legal entities.”
It’s not fair that the some of the wealthiest people can avoid paying tax. And it’s not fair that some of the poorest people in Uganda have to walk for an entire day to access healthcare. We can no longer stand by while the poorest countries are deprived of tax revenues that could provide life-changing essential services for those who need them most.