A new scathing report from Christian Aid, to accompany a parallel report by pressure group The Tax Justice Network, has harshly criticised multinational accounting firms for “ripping off the poor” and undermining democracy by fostering tax avoidance on an international scale, reports The Herald.
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The report, entitled The Shirt Off Their Backs, by the Christian humanitarian charity also accused the accountant and lawyer institutes of “indifference” towards abuses of taxation law by member firms.

The Tax Justice Network’s Tax Us If You Can study has made the claim that tax avoidance, combined with capital shift, by companies and individuals in poor countries on a massive scale, has resulted in a US$500bn loss in revenue in the developing world, a sum which far exceeds the amount these countries receive in aid.

The hard-hitting reports come not long after a US$465m settlement by KPMG after it admitted selling “unlawful” tax shelter schemes costing the public literally billions of dollars.

Mike Rake, London-based chairman of KPMG International said he was “embarrassed” and “ashamed” by the incident, although he went on to stress that the practices involved constituted a “small, non-core” part of the US firm’s business, reported The Herald.

The loss of revenue is particularly damaging to developing countries because of its knock-on effect to the already shrinking levels of state support for social infrastructure, an issue which has become topical once again in the aftermath of the New Orleans tragedy.

“There is a crisis developing in poor countries as public services and infrastructure crumble because of a lack of public money,” said Andrew Pendleton, senior policy officer at Christian Aid. “Tax avoidance by wealthy people and multinational companies is one of the main causes of this.”

Tax havens are also a huge part of the problem according to the two reports. According to the Tax Us If You Can report, the global financial services industry re-routes world trade through tax havens specifically for tax avoidance purposes.

While the rich corporations have profited a massive estimated US$11.5 trillion into tax havens, the report claims, governments have been footing a bill to the tune of around US$255bn.

Christian Aid claims that multinational accounting firms are partly responsible for this: “Accountancy firms, many of them global corporations, are champions of ‘tax planning’, whereby, along with their clients, they organise networks of offshore subsidiaries to avoid paying tax.”

The two reports come just days before the UN’s key meeting, The Millennium Review Summit, starts in New York.