Mr. Sorley McCaughey:

I thank the committee for inviting us to make a presentation today. Most, if not all, members will already be aware of the work of Christian Aid Ireland. For those who may not be, in brief, it is an Irish international development agency working in almost 50 countries globally, carrying out emergency humanitarian work as well as long-term development work that aims to address the root causes underpinning why people are and remain poor.
We first received Irish Aid funding in the 1970s. More recently, it was one of the agencies to receive multi-annual funding from Irish Aid for 2012 to 2016 in support of our current programme, of which Angola and Sierra Leone are both a part. The programme includes seven countries - Angola, Sierra Leone, Zimbabwe, Israel and occupied Palestinian territory, Colombia, El Salvador and Guatemala. The coherence to our programme lies in their categorisation as conflict or post-conflict countries and provides, therefore, opportunities for useful inter-country information exchange. For example, we are researching examples of partner organisations' strategies for resisting land grabs in their respective countries. This follows on from a conference we jointly hosted with the University of Limerick last year on the same subject where partner organisations attending the conference gave accounts of their own experience of resisting land grabs.
Most importantly, we want to bring to the attention of the committee the worsening humanitarian situation in Angola, a subject that has received virtually no media coverage, yet is a dire situation that threatens to worsen. My colleague Karol Balfe, who was in Angola in February this year, will present some key findings and recommendations from our partners working in Angola later.
I would also like to highlight a report that Christian Aid partners in Sierra Leone have recently published on the country's massive loss of revenue due to the granting of tax incentives to large multinationals. Tax justice is a key corporate issue for Christian Aid and is an area in which we have developed a degree of expertise. In 2010, Christian Aid was identified as one of the 21 most influential organisations in the world of tax by International Tax Review. We are also members of several international bodies, including the OECD informal task force on tax and development. We sit on the European Commission's recently established platform for tax good governance, which brings together governments. Ireland is represented by the Department of Finance and the Revenue Commissioners as well as private sector and civil society representatives.
We have written and spoken extensively about the tax evasion and avoidance, the tax practices of multinationals, the role of states - including Ireland - and international developments at OECD and EU level. I say this not by way of blowing our own trumpet but to give the committee a sense of the experience and knowledge on international tax issues that Christian Aid brings to discussions.
The report today gives a flavour of what we are doing in Sierra Leone. Clearly there are issues, however, that the report raises that feed into the ongoing discussions at an international level at the OECD and EU. Perhaps the area of international tax justice and the changes taking place at OECD level are a subject that the committee would be interested in returning to at a later stage.
The UN estimates that least developed countries need to raise at least 20% of their GDP through taxes to meet the millennium development goals by 2015. Sierra Leone, however, takes in only 10.9%. Revenue lost to custom duty and goods and services tax exemptions alone in 2012 amounted to 8.3% of GDP, $224 million. In 2011, the figure was even higher, 13.7 % of GDP. It will be almost impossible for the Sierra Leonean Government to implement its poverty reduction strategy, Agenda for Prosperity, without a significant increase in revenue, yet it in 2011 it spent more on tax incentives than on development priorities. In 2012 government tax expenditure amounted to more than eight times the health budget and seven times the education budget.
Proponents of tax incentives argue that they are necessary to attract foreign direct investment. However, evidence from elsewhere suggests otherwise. The Africa department of the International Monetary Fund states, “Investment incentives, particularly tax incentives, are not an important factor in attracting foreign investment.” In fact, the countries most successful in attracting foreign investors have not offered large tax breaks. More important factors have been good infrastructure, low administration and setup costs, political stability and predictable macroeconomic policy. This view is backed up by government officials in Sierra Leone interviewed for the report, who believed the tax breaks to be excessive and would better be spent providing an enabling environment for foreign investment, such as good infrastructure.
The Sierra Leonean Government policy on tax incentives is criticised in three ways: too many incentives are granted to individual companies by a small number of ministers and officials, increasing the possibility of corrupt deals; there is a lack of parliamentary oversight; and no economic rationale is provided by government for offering tax incentives in Sierra Leone. Assumptions are made about the effectiveness of tax incentives, but no convincing case has been made.
The report makes recommendations to the Sierra Leonean Government and Parliament. They are mainly about increasing the transparency around the deals that are made. They also include empowering and strengthening the oversight function of the parliament; carrying out a cost-benefit analysis on all tax incentives granted; reviewing all incentives with the purpose of reducing them; and working with governments of other Economic Community of West African States, ECOWAS, countries to ensure there is no regional race to the bottom in lowering tax rates and increasing tax incentives to multinational corporations.
There is one specific recommendation for the Irish Government that is not contained in the report but is being pursued bilaterally. It encourages the Irish Government or Irish Aid, through its role as a development partner in Sierra Leone, to try to have included in the agreed framework between the Government of Sierra Leone and the development partners a specific indicator or requirement that the tax expenditure be published in the national budget. Irish Aid could play a role in pushing for this. This will clearly show how much the country is losing to tax incentives.

A link to the report has been circulated. The main bulk of the presentation is on the humanitarian situation in Angola, which Ms Balfe will discuss.