The coalition government is refusing to support recommendations that would increase transparency and reduce tax dodging in countries both rich and poor, says UK-based global development agency Christian Aid.
The agency is critical of the Government’s decision to ignore key recommendations from Parliament’s cross-party International Development Committee, which urged concrete action to tackle global tax dodging.
The committee in a recent report called for UK-owned multinationals to be required to report their accounts on a country-by-country basis to make it easier to spot irregularities. The committee also recommended that the UK should push for automatic information exchange between tax jurisdictions to deter tax dodgers.
In its response on 13 November 2012, the Government rejected these recommendations. Despite claiming to see "transparency and information exchange as key tools", the Government continues to back banking secrecy in the form of the kind of bilateral tax deal signed with Switzerland last year.
Christian Aid says tax havens only offer such deals to economically powerful countries like the UK as a means of forestalling tougher international laws, leaving poor countries unprotected and unable collect the tax they need to lift themselves out of poverty. It estimates that corporate tax dodging costs developing countries more than $160 billion a year, nearly one and a half times the entire global aid budget.
A similar deal in Germany is about to be struck out by the Bundesrat, the legislative body that represents the country’s sixteen Länder (federal states).
Christian Aid’s Senior Economic Justice Adviser, Joseph Stead, commented: "Poor countries are not able to collect taxes and tackle poverty and inequality by themselves because of the lack of international rules that would protect them from the abusive practices of a number of multinationals operating in their countries."
He continued: "The UK Government is failing in its responsibility as major political and economic power to create a global system that works for everyone, not just a few.
"Nowhere is this more clearly demonstrated than in the refusal to assess the global impact of UK tax policy; it is not just the IDC that has recommended this, but also the IMF, World Bank, United Nations and OECD. It’s time for the Government to change this approach, starting with the next budget.
"As the UK takes a global leadership role next year at the G8 summit it needs to put this issue on the agenda to help poor countries become prosperous and accountable societies, and not dependent on aid to build their futures," concluded Stead.
The UK government's inadequate response last week came a day after MPs in the Public Accounts Committee had grilled multinational bosses over tax avoidance in the UK.