UK Chancellor urged to crack down on tax dodging 'pirates'

By agency reporter
September 6, 2009

Christian Aid has been urging G20 finance ministers meeting in London this weekend to prioritise reforms that would help developing countries counter the tax dodging activities of international companies.

The UK based churches' international development agency has called on the Chancellor of the Exchequer, Alastair Darling, as host of the conference on 4-5 September 2009, to take a lead in championing the interests of poor countries.

Christian Aid says that every year the developing world is cheated out of as much as $160 billion in revenue by companies disguising their profits –often by using tax havens - to lower their tax liability.

Development campaigners accuse the tax dodgers of being 'pirates'.

The NGO wants new rules that would force tax havens to reveal automatically the identities of businesses and individuals holding funds offshore, and provide details of the amounts involved.

It also wants companies and corporations to be forced to disclose the profits they make and the taxes they pay, in every country where they operate.

This week, the finance ministers are due to discuss a new report from the Organisation for Economic Co-Operation and Development (OECD) on the progress being made towards improving standards of tax transparency.

Dr David McNair, senior economic justice adviser at Christian Aid said: "In the past we have been dismayed at the OECD’s lack of ambition and we don’t expect any major breakthrough. The OECD is tasked with providing technical advice to the G20. All too often, however, it simply reflects the interests of the world’s wealthiest nations."

He continued: "In a communiqué earlier this year, G20 countries committed themselves to proposing measures to counter tax evasion that would benefit everyone, not just rich countries."

McNair went on: "As the host of this meeting Alastair Darling is in a unique position to lead his counterparts in delivering on the undertaking that they gave. Reform is vital. The revenues lost to developing countries at present could, if used according to current spending patterns, save the lives of 350,000 children under the age of five each year."

Christian Aid says that unscrupulous businesses are able to remove vast sums from developing countries through the use of a number of illicit practices known collectively as ‘trade mispricing’.

The OECD’s proposals to the G20 to counter tax dodging centre on the use of bilateral instruments called Tax Information Exchange Agreements (TIEAs). The OECD announced earlier this year that tax havens would find themselves on a blacklist unless they sign such agreements with a minimum of 12 countries.

"TIEAs are not the way forward," said Dr McNair. "They are extraordinarily bureaucratic and riddled with get-out clauses. The burden of proof countries must provide when requesting information is so high that they can seldom provide it."

The Christian Aid adviser added: "Its only rich countries that have enough tax officials and other resources to even try. And its only rich countries that have the leverage to force tax havens to sign up to TIEAs."

"The OECD is seeking to broaden the scope of TIEAs by making them multilateral. It fails, however, to address their sheer unworkability. A new multilateral agreement on tax information sharing is needed in which information must be exchanged automatically, to ensure that developing countries benefit", he said.

Dr McNair claimed that the UK’s recent tax deal with Liechtenstein was tacit acknowledgement that TIEAs alone were insufficient to counter tax dodging. For as well as signing a TIEA with the tax haven, the UK needed a second agreement to ensure that UK taxpayers with accounts in Liechtenstein pay the right amount of tax.

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