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Why multinationals should pay their fair share of taxes

Why multinationals should pay their fair share of taxes

By Magdalena Sepulveda

Will 2020 be as explosive as the year that is coming to an end? This is the anxiety that embraces governments around the world, still destabilized by massive and unexpected popular uprisings. In Chile, where I come from, but also in Ecuador, Venezuela, Bolivia, France, Iraq, Lebanon, and Egypt, among others, we have seen millions of people invade the streets this year, paralyzing all activities in their countries. The contexts are different, but everywhere we can see the echoes of a global revolt against extreme inequalities and the degradation of living standards.

Ironically, on 10 December 1948 – 71 years ago – all these countries enthusiastically supported the Universal Declaration of Human Rights. According to this document, which remains visionary, they committed themselves to respecting not only civil and political rights (e.g. the rights to life, freedom of expression and religion), but also economic, social and cultural rights (e.g. to equitable and adequate remuneration, periodic paid holidays, and access to education, health care, and necessary social services). All rights that are increasingly being violated in an increasingly unequal world. Last year, according to Oxfam, 82% of global wealth generated went to the richest 1% of the world’s population, while the poorest 50% – 3.7 billion people – did not benefit from this growth in the least.

Faced with popular demands, discredited governments excuse themselves by arguing that their coffers are empty. They tell us that they are forced to take austerity measures, they want to convince us that they do not have the money to finance quality public services, that they lack the means to provide their elderly with decent pensions, and that they cannot cope with the climate crisis.

However, the evidence shows that austerity measures are not the solution. They only aggravate gender and racial disparities, plunge people into and keep them in poverty, and deprive them of access to health care, education, or housing. Citizens in the streets demand a progressive increase in tax revenues in order to provide the population with the goods and services necessary for a dignified life.

There are several public policy options that would allow even the poorest countries to increase their fiscal coffers. Within those solutions, it becomes more imperative for countries to change the international tax system, which is not only obsolete, but also unfair. The current system allows for systematic tax evasion by multinationals. They can declare their profits in the countries of their choice by manipulating transactions between their subsidiaries. In this way, they are able to be loss-making where taxes are high – even if it is in these countries where they generate more economic activity – and to declare high profits in jurisdictions where taxes are very low or even nil – even though they do not actually produce or have any clients there.

This is no small problem. For example, in the United States, 60 of the 500 largest companies, including Amazon, Netflix, and General Motors, did not pay any taxes in 2018, despite an accumulated profit of US $79 billion. Developing countries are thus deprived of at least US $100 billion annually, which is diverted to tax havens. This sum is greater than all the money spent by rich countries on development assistance.

If multinationals – and the super-rich – do not pay their fair share of taxes, governments cannot invest in access to education, health care, and decent pensions, or take measures to mitigate and adapt to the climate crisis. The impact is even greater for developing countries, as they rely more on corporate taxes. They account for 15% of total tax revenues in Africa and Latin America, compared to 9% in rich countries. Furthermore, the tax burden is shifted to the poorest, usually through taxes regressive to consumption, such as value-added tax (VAT).

This is what recently led the Organisation for Economic Co-operation and Development (OECD) to pronounce itself for the first time in favour of a change in international tax rules. However, as we have pointed out at ICRICT – an international tax reform commission of which I am a part – its proposal is neither ambitious nor fair enough. OECD wants to distribute only a very limited part of international taxes, and according to criteria that will benefit the rich countries first and foremost, at the expense of the others.

It is therefore imperative that the governments of developing countries mobilize. For the first time, they have the opportunity to make themselves heard. While richer nations have more power in the negotiations, OECD has invited 135 countries to speak on the issue in the coming weeks. If some governments have not yet understood the importance of the issues at stake, it is we, organized civil society and ordinary citizens, who must intervene to put pressure on our governments.

On this International Human Rights Day, it is incumbent on all of us to make a clear commitment to the issue of international taxation, no longer considering it as a technical issue to be discussed behind closed doors. We must work collectively to put the interests of the majority of citizens above the often unreasonable profits of a small group of shareholders. From Santiago to Beirut, the streets remind us: the fight for human rights is also the fight for a dignified life, without the fear of hunger and poverty.

Magdalena Sepúlveda is Executive Director of the Global Initiative for Economic, Social and Cultural Rights and a member of the Independent Commission for the Reform of International Corporate Taxation (ICRICT). From 2008 to 2014 she was the United Nations Special Rapporteur on Extreme Poverty and Human Rights. @Magda_Sepul


 

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Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.