British government plans to promote a new treaty allowing developing countries to share tax information held by rich countries are extremely welcome, says the UK-based international development agency, Christian Aid.
"It is great news that the UK will create a treaty to be signed by both the major financial centres and - crucially - developing countries," said Dr David McNair, Christian Aid’s Senior Adviser on Economic Justice.
"This marks a historic moment in the campaign to curtail the massive tax losses that developing countries needlessly suffer," he added.
News of the UK plan to promote a multilateral treaty for tax information sharing emerged on 27 January 2010 in a speech given by Stephen Timms, Financial Secretary to the Treasury, at the Organisation for Economic Co-operation and Development (OECD) conference in Paris on tax and development.
Dr McNair continued: "We hope that other wealthy countries, including tax havens, will swiftly sign up to the new tax information exchange treaty, which could dramatically improve the lives of people in poor countries.
"Christian Aid also welcomes the UK government’s recognition of the need to move towards automatic exchange of tax information – rather than merely on request.
"Developing countries get little or no benefit from existing bilateral tax treaties, which are almost exclusively between rich countries and tax havens and which are extremely cumbersome and riddled with get-out clauses.
"That is why progress towards a single treaty which is signed by rich and poor countries alike is so vital. The Chancellor, Alistair Darling, should work on this with other rich nations at the upcoming G7 Finance Ministers’ meeting on 5-6 February."
Christian Aid estimates that at present, developing countries lose some $160 billion every year to tax dodging by companies trading internationally. The sum is one-and-a-half times the amount they receive in aid from rich countries.
The loss of these revenues has a devastating effect on developing countries’ ability to provide basic pubic services such as education and health. If the money were allocated in line with poor countries’ existing expenditures, Christian Aid estimates that it would save the lives of 350,000 children under the age of five every year.
Dr McNair explains: "The UK’s offer to host a conference this year on technical assistance for developing countries’ tax collection authorities is also welcome. It will help to maintain international pressure for progress towards a multilateral tax information exchange treaty, as well as leading to greater help for poor countries which, at present, struggle to keep up with tax dodgers.
"We are also pleased to see the UK government’s call for the OECD to work on getting country-by-country reporting adopted internationally as the standard that multinational companies must follow in their published accounts."
He concuded: "The introduction of country-by-country reporting would require companies to report on their profits, tax payments and other activities separately for every country in which they operate. This, in turn, would help tax authorities around the world to collect the revenues which they are owed and which are needed in every country."