G8 countries have yet to live up to the important commitments they made on tax and transparency at their Northern Ireland summit a year ago. New analysis by Christian Aid, Action Aid, Global Witness and the Financial Transparency Coalition shows the UK government needs to build on its leadership if there is to be a strong and lasting legacy to the tax commitments made at Lough Erne.
At the gathering hosted by David Cameron at Lough Erne on 17 and 18 June 2013, G8 leaders declared that they would tackle some of the ways in which rich and poor countries alike lose billions each year to tax dodging, corruption and other financial crimes.
They also committed to including developing countries in international talks on how to make multinationals and rich individuals pay their taxes.
"Twelve months on, the picture is disappointing. While there are a few bright spots, there are also many broken promises. Developing countries lose more from tax abuse and corruption than they receive in aid, they can’t afford slow progress", said Joseph Stead, Christian Aid’s Senior Economic Adviser.
Anders Dahlbeck, tax policy adviser at ActionAid, added: "The main problem with the actions taken since Lough Erne is while there are potential gains for developed countries, they are doing little if anything for developing countries, who are not present at the negotiating table at the OECD, where the new international tax rules are being discussed."
The agencies have drawn up a score card which analyses developments on tax and transparency over the last year, and highlights how some of G8 leaders’ commitments have been watered down, or where progress has been limited, or non-existent.
One example of how the effectiveness of the Lough Erne declaration has been weakened relates to multinational companies. At the summit, G8 leaders called for multinationals to have to reveal separate financial details for each of the countries in which they operate. Such a move would make it harder for multinationals artificially to shift their profits into tax havens.
Now that plan is being scaled back, while business lobbyists are attempting to restrict the circulation of such ‘country-by-country’ reports to the countries in which each multinational has its headquarters, meaning most developing countries will never be able to see and use them.
In the crucial area of company ownership transparency, by far the most progress since Lough Erne has been made by the UK, which is introducing a new, public register of who really owns UK-registered companies.
But while the UK and France are backing public registers, progress from the rest of the G8 has been disappointing. The lack of action by the US is especially concerning given that it incorporates more than ten times as many companies as all the world’s tax havens combined. There has also been little response from the rest of the world, including the UK's Overseas Territories and Crown Dependencies, which will limit the impact of individual countries progress by providing alternative jurisdictions in which to hide money.
"Financial crime doesn’t respect national borders", said Porter McConnell, Manager of the Financial Transparency Coalition. "If there's a lasting legacy of Lough Erne, it needs to be recognition that the solutions to financial transparency are global. It's the only way to stop the outflows of illicit cash that are robbing us all."