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Tackling tax treaties in developing countries

In the 1970’s, many tax treaties were signed in developing countries in hope of attracting inward investment. ESRC-funded research, led by Martin Hearson at London School of Economics has highlighted the cost of tax treaties to some of the world’s poorest countries. The research found that these treaties, some of which are decades old, reduce tax collected from multinational corporations by hundreds of millions of pounds each year. In some cases, tax treaties costs developing countries more than five per cent of their corporate tax revenue.

Hearson developed a dataset of 500 treaties in a simple format, supplying governments, journalists and civil society organisations. ActionAid, an international development organisation, built a tax treaty campaign using his research to lobby for the renegotiation of older agreements and challenge ratification of newer ones in Malawi, Nigeria and other countries.

Hearson’s work has also increased political interest in tax treaties in developed countries. In 2015, his evidence to the Danish parliament's Fiscal Affairs Committee, following ratification of a tax treaty between Denmark and Ghana, contributed to the committee's demand for more input into negotiating future treaties.

“Martin Hearson has been an invaluable resource for our work on tax justice in general and for our tax treaties advocacy and campaigns work in particular.” (Anna Thomas, Head of Policy, ActionAid UK)

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