Tax dodging by foreign companies risks rendering aid pointless

The amount lost to foreign countries through tax dodging far outstrips the aid budget – and it could get worse.

From caravans, to pasties and grannies, the tax U-turns performed by the Government after the Budget last March have been well documented. But a much more fundamental shift in tax code, which will make it far easier for the biggest multinationals to make even greater use of tax havens has gone almost unnoticed.

Changes to obscure sounding Controlled Foreign Company (CFC) rules radically weaken the UK’s anti-tax haven abuse regime. Not only will they cost the UK almost £1 billion in lost revenues, ActionAid estimates they could also cost developing countries £4 billion a year.

Following a nine month investigation into the importance of tax revenues for developing countries, the cross-party International Development Select Committee are today calling on the Government to drop its CFC changes if a Treasury assessment finds that it will do harm.

Sir Malcolm Bruce MP, Chair of the Committee, argued that "it would be deeply unfortunate if the Government’s [aid] efforts were undermined by its own tax rules." A loss of £4bn is roughly half the British aid budget.

At present, the Treasury refuses to undertake an impact assessment – in spite of recommendations from IMF, World Bank and UN, alongside calls from thousands of ActionAid supporters around the country.

The International Development Committee (IDC) report also recognises the fundamental importance of helping developing countries to increase their own tax revenues, enabling them to put more teachers in schools and nurses in hospitals. Ultimately, improving their ability to collect tax will enable poor countries to end aid dependency.

The committee calls on the Department for International Development to give a higher priority to helping the developing world improve its tax base. Ministerial oversight is vital to ensure that future moves by the Treasury don’t come at the expense of some of the world’s poorest countries.

The report echoes the calls of tax justice campaigners for much greater transparency in the way both multinational companies and tax havens operate. In particular the report highlights the need for the Treasury to press the Channel Islands and the Isle of Man to make the financial accounts of subsidiary companies registered there publicly available.

The OECD currently estimates that developing countries lose three times more to tax havens than they receive in aid each year. Any measures which help prevent this vast out-flow of vital resources could have a transformative effect on the lives of millions of poor people.

The challenge to Government laid down by the IDC is clear. The question is – will they listen?

Uncanny Valley: George Osborne and Mitt Romney spoke during the latter's visit to Britain. Photograph: Getty Images

Chris Jordan is a Tax Justice Campaigner for ActionAid

Getty
Show Hide image

5 times Hillary Clinton completely owned Donald Trump

The Democratic presidential candidate called out her rival on multiple occasions. 

Only 5 per cent of what Republican Presidential candidate Donald Trump says is true, according to the fact checkers Politifact. And yet for months his outspoken comments on race, his business acumen and most of all his rival's emails has sustained his campaign.

But when the two candidates stood head to head in the first debate, Hillary Clinton was the clear winner. Here are some of her best quotes:

1. Nuclear tweets

"That is the number one threat we face in the world and it becomes particularly threatening if terrorists ever get their hands on any nuclear material. So a man who can be provoked by a tweet should not have his fingers anywhere near the nuclear codes as far as I think anyone with any sense should be concerned."

2. Racist lies

"He has really started his political activity based on this racist lie that our first black president was not an American citizen."

3. Zero taxes

"Maybe he doesn't want the American people to know that he's paid nothing in federal taxes, because the only years anybody's ever seen were the couple of years when he had to turn them over to state authorities when he was trying to get a a casino licence, and they showed he didn't pay any federal income tax. So if he's paid zero, that means zero for troops, zero for vets, zero for schools or health. I think probably he's not all that enthusiastic about having the rest of our country see."

4. Pigs and slobs

"This is a man who has called women pigs, slobs, and dogs. Someone who has said pregnancy is an inconvenience to employers, and has said women don't deserve equal pay unless they do as good a job as men."

5. Little guys

"If your main claim to be President of the United States is your business, I think we should talk about that. Your campaign manager said you built a lot of businesses on the backs of little guys. And indeed, I have met a lot of people who were stiffed by your and your businesses, Donald. I've met dishwasers, painters, architects, glass installers, marble installers, drapery installers, like my dad was, who you refused to pay when they finished your work that you asked them to do.

"We have an architect in the audience who designed one of your club houses on your golf courses. It's a beautiful facility it was immediately put to use, and you wouldn't pay what the man needed to be paid - what he was charging you.

"Do the thousands of people who you have stiffed over the course of your business not deserve some sort of apology?"

4. Negative painter

"It's really unfortunate that he paints such a dire, negative picture of black communities in our country."

5. Fact check

Donald Trump: "You're telling the enemy everything you want to do. No wonder you've been fighting Isis your entire adult life."

Clinton (68): "Please, fact checkers, get to work!"