Government urged to act on new tax dodging report

By agency reporter
27 Aug 2012

New cross-party recommendations on how the UK should lead the global fight against tax dodging are far-sighted and should be heeded by the Government, says Christian Aid.

"We are terrifically encouraged by the International Development Committee’s report" commented Joseph Stead, Senior Economic Justice Adviser at Christian Aid.

The report was made public on 23 August 2012.

"It’s fantastic to see there is a strong, cross-party consensus that collecting tax effectively is vital for poor countries to escape aid dependency and poverty," Mr Stead continued.

"We’re also really pleased that MPs are calling on the UK Government to lead the global fight against tax dodging, rather than waiting for other countries to agree on what to do about it.

"For the sake of the billions of people harmed by tax dodging, the Prime Minister must act on the Committee’s powerful recommendations. Next year’s UK presidency of the G8 provides a global platform to demonstrate this leadership," said Mr Stead.

Christian Aid says it strongly agrees with the Committee’s call for UK-owned multinationals to be required to report their accounts on a country-by-country basis, which would make it easier to spot irregularities and help citizens everywhere to assess companies’ contributions to society.

The Committee is also right, says the aid agency, to argue that the UK should push for all countries both to make more information publicly available and to share information about who owns what within their borders, which would provide a strong deterrent to those aiming to dodge taxes, giving them fewer places to hide.

Christian Aid, a UK-based international development agency, gave oral and written evidence to the cross-party Committee’s inquiry and has campaigned since 2008 for reforms to help poor countries collect more of the taxes they are owed.

It estimates that every year, they lose $160 billion in revenue as a result of tax dodging by multinational companies.

The MPs’ new report recognises there is "a significant problem" of transfer pricing abuse, in which the subsidiaries of a multinational company trade with each other at prices designed to shift profits into tax havens.

Christian Aid has also welcomed the Committee’s acknowledgment of the lack of joined-up thinking in Government and the fact that both the Treasury and the Department for International Development (DFID) have a significant role in helping developing countries collect tax.

The Committee recommends that when the UK plans a new tax law, the Government should assess its impact on poor countries’ ability to collect tax and publish the findings alongside the proposed new law. MPs have also recommended that the Government designate a DFID minister who is responsible for the impact of new UK tax laws on poor countries.

"These recommendations are important because, as the MPs recognise, poor countries’ ability to collect the taxes they are owed is affected not just by their own governments’ policies but also by the decisions of international organisations and other countries, including the UK," added Joseph Stead.

"What has happened recently with the Controlled Foreign Companies legislation is an example of how the UK can make it harder for poor countries to collect what they’re owed. Allowing the situation to get worse for developing countries will only increase their dependence on aid and it’s exactly the opposite of what an enlightened government should be doing," the Christian Aid spokesperson concluded.

[Ekk/3]

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