Is tax the casualty when the big deals are struck?

Outlook

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Action Aid is taking Shell to task over its record in Nigeria. A while back a consortium including the Anglo-Dutch oil giant signed a deal with the exceedingly nasty military government that used to run the country.

According to a report by the charity the deal – which also involved Total and Italy’s Eni – included tax breaks worth more than twice the country’s annual health budget.

Tax breaks are not necessarily a bad thing where they are used to encourage beneficial behaviours on the part of corporate entities, such as investing in training or the setting up of businesses in deprived areas.

But, as the recent run of cases before the European courts have shown, they’re much less welcome when they’re used to artificially lower the tax bills of multinationals to the detriment of neighbouring countries.

If Action Aid is right, and the Nigerian arrangement served merely to deprive that country of much needed revenues to the detriment of millions of people living in dire poverty, then it was a few shades worse than even the Double Irish or the Dutch Sandwich (see above).

The consortium argues that they’ve added to the socioeconomic well-being of the country. Perhaps that’s true. All the same, when it’s finished sorting out the artificial tricks and dodges used by multinationals in the developed world, the OECD might care to turn its attention to the developing world and whether the tax breaks offered stack up when set against the alleged socioeconomic returns.