April 5, 2013 by Caroline Maxwell
So it has been less than a month since the UK announced that it would meet its historic promise of 0.7 per cent of national income on overseas aid. Cause for celebration? Yes. However we know that aid alone is not going to end world poverty and neither must we dismiss the fact that sometimes it can be abused.
The UK’s International Development Committee Report on aid in Pakistan was headline news this week.
This week the headlines regarding foreign aid have targeted the latest International Development Committee’s report on Pakistan. One of the Committee’s concerns is that not enough tax is raised in Pakistan to fully finance improvements in the quality of life for poor people.
Of course the anti-aid brigade will use this as an example of why aid doesn’t work, arguing that it is just a hand-out exploited by the wealthy in poorer nations, and then that c-word always emerges – ‘corruption’!
Contrary to popular belief, aid campaigners are aware and just as angry about corruption and tax avoidance as the rest of society. We’ve been advocating that transparency and accountability are essential if tax revenues are to be used to fund health and education programmes.
The OECD estimates that developing countries lose three times more to tax havens than they receive in aid each year. Obviously this undermines the ability of these governments to lead their own fights against poverty, and reduces citizens’ confidence in their governments’ ability to provide for them.
Everyone has a role to play in fighting tax evasion but the responsibility must fall on leaders and governments to make it a priority in addition to donors meeting their aid commitments. The two are not mutually exclusive. While aid is a small (less than 10 per cent of national income) and significant part of the story, taxation is an important, sustainable and predictable source of finance for all governments including in developing countries.
We know that if developing country governments do not publish their budgets and details of how they spend the taxes collected, then poor communities cannot make sure that promises are being kept, check how money is spent to ensure their children get the services they need, or point to where the money has gone astray.
It is essential that civil society groups are given the tools to equip them to hold their governments to account. Tearfund has seen numerous examples of the power that churches and their congregations wield in urging their governments to allocate spend on a pro-poor basis and in holding them to account for doing so.
That’s why our campaign Unearth the Truth focuses on transparency in the extractives sector and we have been calling for mandatory disclosure of payments (including tax payments) that oil, gas and mining companies make to governments.
Tearfund campaigners putting a spotlight on corruption
There are various ways in which donors like the UK can, and do, support initiatives which combat corruption. These include promoting good governance, as well as specific anti–corruption measures, through helping to build strong and accountable public sectors and domestic institutions and by supporting systems which help parliaments, civil society and the media to act as ‘watchdogs’ against corruption and scrutinise how aid money is spent.
This year the UK is chair of the G8 and of the Open Government Partnership and is in a strong position to drive forward initiatives that can increase transparency, both in how governments raise money (particularly tax payments and money for natural resources) and how they spend it.
In a world where there are not endless pots of money available, we need to ensure that resources – whether from tax, investment or aid – are used to tackle poverty in the most efficient and transparent way. That means promoting greater transparency across the board – in tax revenues, in land deals and in budgets to ensure that that schools and clinics get the funding they need.
Let us not fall into the trap of thinking that corruption and tax evasion only exists in non Western nations as some sensationalist news stories on foreign aid allude to. As David Cameron himself has said we need to get our own house in order when it comes to these issues too.
The UK has further to go to be in a leadership position on this agenda than it has on aid. Our recent Bribery Act – making it illegal for UK companies to bribe foreign officials – was a good start, but the government needs a comprehensive anti-corruption strategy and must do much more to tackle systematic tax evasion if Cameron really does want the UK to play a leadership role.