ActionAid urges UK to rethink colonial-era tax deal which slashes money for health care and education

The Government is under pressure to change the terms of a colonial-era tax deal with Malawi that campaigners argue exploits and slashes money for health care and education in the poorest country in the world.

ActionAid will launch a campaign this week highlighting a treaty from 1955 that means British multinationals can easily move money out of Malawi without having to pay any tax.

The UK is the third biggest international investor in Malawi, a country so poor that it has 300 doctors for 16 million people and the average annual income per head is $255 (£235). Only Switzerland and South Africa invest more.

The treaty has undergone only minimal revisions over the years and is so out-of-date that it does not cover the taxation of televisions and related goods. It was signed by the British Governor of Malawi on behalf of the governments of the now defunct states of Southern Rhodesia, Northern Rhodesia and Nyasaland.

ActionAid’s campaign follows widespread condemnation of Google’s decision to pay only about 3 per cent tax on its profit over the past 10 years in a settlement with the Treasury.

Anders Dahlbeck, of ActionAid, said: “The row over tax dodging by big companies like Google shows how strongly the British public feels that multinationals aren’t paying their fair share. Yet this is just part of a far larger global problem. Developing countries lose $200bn a year to corporate tax avoidance, with women and girls living in poverty paying the price as key public services like schools and hospitals are starved of funding.

“The UK government must put the fight against poverty at the heart of its tax policy by renegotiating its treaty with Malawi. It’s time to ensure that UK companies pay their fair share in the world’s poorest country.”

Shadow cabinet members Lord Falconer and Seema Malhotra have put further pressure on George Osborne over the Google deal in a letter to the Chancellor today. They are demanding clarification on how Google ended up agreeing to pay only £130m of tax, so as to “restore public confidence” in how HMRC “operates in cases such as this”.