Tackling tax avoidance cannot be an afterthought

The prime minister must keep his promise: tackling tax avoidance cannot be an afterthought.

What a difference a year makes. Leading the G8 at Lough Erne last year David Cameron said that the agenda for the world’s most powerful nations should focus on trade, tax and transparency – and he was clear that this focus should be to the benefit of developing countries. Yet, reporting to the House of Commons a fortnight ago on this year’s G20 meeting in Brisbane, the prime minister did not mention developing countries once.

He did mention tax avoidance in his Statement, boasting that an additional $37bn has been taken from big companies as a result of steps taken by the G20, but when I asked him how much of this revenue has benefitted developing countries he did not know the answer.

ActionAid has said that corporate tax avoidance costs developing countries $160bn. Tackling avoidance is key to tackling global poverty and inequality, and it cannot therefore be an afterthought. That is why I made representations to the treasury and the Department for International Development before the G20 meeting in Brisbane to call on ministers to ensure that the promises made at Lough Erne are delivered. Announcements are little use unless they are followed through with action.

The Lough Erne declaration stated, for example, that ‘companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily’. The United Kingdom is now in the process of introducing the world’s first public register of beneficial ownership which should help reduce tax avoidance, corruption and money-laundering by making it harder for companies to hide their income in networks of shells and trusts. But, while the Overseas Territories and Crown Dependencies committed themselves to holding consultations on introducing similar arrangements, none of them has so far committed to introducing a register.

The UK’s efforts should be welcomed, but it is clear that the government should be doing much more to ensure that other countries sign up to tackling tax avoidance and to ensure that revenues reach those who need them most in developing countries. A recent ComRes poll for Christian Aid and Action found that 85 per cent of the UK population believe that tax avoidance is morally wrong.

The government has an ally in parliament, with the House of Commons leading calls for reform. From the public accounts committee’s interrogation of Amazon, Starbucks and Google to the international development committee’s inquiry into improving tax collection in developing countries, members of parliament from across the political spectrum have been calling on the British government and businesses based here to show real leadership on tackling tax avoidance.

I am pleased that Ed Balls has already said that tackling tax avoidance will be a priority for the next Labour government. We need to push for a tax system which is tougher and more transparent and which recognises the impact on other jurisdictions, including developing countries.

The current government, for example, supports the principle of automatic information exchange through which countries share tax information to reduce avoidance but it has refused to pilot any programmes that ensure developing countries have the resources to benefit from this exchange. Once again, words without action are meaningless.

Tomorrow’s autumn statement provides the government with its final opportunity in this parliament to show global leadership by getting serious on tackling corporate tax avoidance. No doubt the statement will focus on economic growth, but tackling inequality through tackling tax avoidance is also crucial. Those with the broadest shoulders must be made to pay their fair share and the prime minister must be made to remember his promise to the world’s poorest.

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Fiona O’Donnell is member of parliament for East Lothian and a member of the international development committee. She tweets @FionaODonnellMP

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Photo: taxbrackets.org

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