How can corporate taxes contribute to sub-Saharan Africa’s Sustainable Development Goals (SDGs)? A case study of Vodafone

Background: The COVID-19 pandemic and the climate emergency threaten progress in reaching many of the Sustainable Development Goal (SDG) targets by 2030. The under-5 mortality and maternal mortality rates are well below the targets, and if we progress at the current pace, there is a high risk of not meeting the 2030 goals. Furthermore, the initial progress in the decline in child and maternal mortality since 1990 is likely to be eroded. Much of this progress has resulted from increased sanitation, drinking water, education, and health service coverage. The adequate provision of public services is possible if there is sufficient government funding. When governments have more income, they spend more on public services, which increases access to fundamental economic and social rights and, thus, contributes to the SDGs. One of the key drivers of government financing, taxation, constitutes 70% of government revenue in low- and lower-middle-income countries. Corporate income tax constitutes 18.8% of tax revenue in African countries compared to 10% of tax revenue in OECD countries. Therefore, it plays a critical role in SDG progress. This paper aims to quantify the contribution of one large taxpayer, that publishes their tax payments, (Vodafone Group Plc) on progress towards SDGs in six African countries. We use econometric modelling to estimate the impact of an increase in government revenue equivalent to Vodafone’s average tax paid between 2007–2017. Results: We find that government revenue equivalent to Vodafone’s taxes made a significant contribution to progress in attaining selected SDGs. We found that the revenue equivalent to Vodafone’s taxes allowed 966,188 people to access clean water and 1,371,972 people to access basic sanitation each year. Over the time period studied, 858,054 children spent an extra year in school and 54,275 children under five years and 3,655 mothers survived. In just one of these countries, Tanzania, the revenue equivalent to Vodafone’s tax contribution allowed 174,121 people to access clean water and 223,586 to access sanitation each year. Over the time studied 187,023 children spent an additional year at school, 6,569 additional children under five and 625 additional mothers survived. Conclusions: These findings demonstrate that the reported contributions from a single multinational corporation drive SDG progress. Furthermore, it highlights the importance of transparent taxes and explores the responsibilities of global institutions, governments, investors, and multinational corporations.

We employed economic modelling from the Government Revenue and Development Estimations (GRADE) tool (v3.3.0, 2022/09/08) to estimate the increase in the number of citizens accessing their rights when there is an increase in government revenue equivalent to Vodafone’s reported tax contributions [50, 51]. The GRADE uses data from countries worldwide to model the impact of government revenue and governance on the coverage of the SDGs, access to water, education, and sanitation, and maternal and child mortality. The GRADE is available as an online visualisation [51], and demonstrates that even a small increase in government revenue has a massive impact in lower-income countries. The model is precise, as shown by comparing the modelled and the actual coverage of the determinants of health, which are generally within one percentage point, and available in Mendeley Datasets [52]. As well as being precise, the GRADE modelling is realistic as it assumes that any additional government revenue will be spent in the same way as it has been in the past and therefore avoids the incorrect assumption that governments will allocate all additional income to one specific sector. For example, if a government typically allocates 10% to health spending and receives additional revenue, then 10% of the additional revenue would be allocated to health. Furthermore, the benefits of an increase in government revenue takes at least five years to become apparent, and the model incorporates this lag effect. Downstream outcomes such as survival are influenced by government spending on all sectors, for example, infrastructure and agriculture, and GRADE modelling incorporates these broader impacts. Hence, the model provides a robust estimation of the effects of government revenue on the SDGs and the impact of an increase in revenue on governance. The GRADE uses government revenue (excluding grants and including social contributions) from the UNU WIDER Government revenue database and the GDP in 2015 constant US dollars taken from the World Development Indicators [53, 54]. The modelling includes six dimensions of quality of governance from the World Governance Indicators (see Table 8 in the appendix for the definitions) [55]. Vodafone’s reported contributions to public finances in six countries – Democratic Republic of Congo (DRC), Ghana, Kenya, Lesotho, Mozambique, and Tanzania – were analysed. Vodafone has published its contributions to governments in their ‘Taxation and our total economic contribution to public finances’ reports from 2012–2018 [47, 56–60]. Contributions include direct revenue, other direct non-taxation, and indirect revenue contributions [61]. The total tax contribution for each country and year was converted into United States Dollars (USD) using the nominal exchange rate listed in each report. The total tax contribution was converted into 2015 USD, the base year used in the GRADE. Tax contributions fluctuate each year; therefore, we used the average for the seven years. The latest year with data for maternal mortality is 2017, thus, the period analysed was 2007 – 2017. We assumed that Vodafone contributed the average calculated for 2012–2018 between 2007–2017, and the maximum benefit was accrued after five years. (An alternative approach would be to use the average contribution as a percent of government revenue). For illustration purposes, Table ​Table22 shows Vodafone’s total contributions to governments in 2018 from their annual report [61]. The total contributions are the sum of columns c, d and e (direct revenue contribution tax, direct revenue contribution non-tax and indirect revenue contributions, see Table ​Table22 for definitions). Column j shows this as a percentage of government revenue. Table ​Table33 shows the total contribution to public finances per country between 2012–2018, and column h shows the average. Total contribution to public finances 2018 in six African countries aTotal revenue bTotal taxable revenue in each country minus allowable expenses cThis includes corporation tax, business rates or equivalent, employers’ national insurance contributions or equivalent, sector-specific taxes (such as ‘special’ taxes or ‘telecoms’ taxes) and other taxes dOther forms of revenue raised by the government and a country’s direct taxation regime, including telecoms licence fees eTaxes collected on governments’ behalf, including pay as you earn (PAYE) income tax, employees’ national insurance contributions, withholding taxes, sales and consumption taxes and value-added tax (VAT) fInvestments in building and maintaining the networks and services relied upon by the 700 million mobile and 21 million broadband customers gThe average number of people employed in the 2018 financial year. This includes direct employees and the relevant share of employees who work for our joint ventures, associates, or other part-owned companies hTotal contributions to governments (total of column c, d and e) iTotal government revenue jPercentage contribution to government revenue (h)/(i) Total contribution to public finances per country each year between 2012- 2017

N/A

• hannah, eilish
• o’hare, bernadette
• lopez, marisol
• murray, stuart
• etter-phoya, rachel
• hall, stephen g.
• masiya, michael