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

Jeremy Corbyn has defied the odds and embarrassed his critics

The pundits were wrong, writes Liam Young. 

On Tuesday I said that Labour would need time to show any drastic improvement in nation-wide elections. With the results now clear I still hold to that premise. After a scary result in Scotland, a ‘holding on’ in Wales and a rather better than expected showing in England it is clear that the public has produced a mixed bag of results. But for Labour, something very interesting has happened.

Before the results were announced pundits were predicting roughly 200 seat losses for the Labour party across local councils. Some of Jeremy Corbyn’s strongest opponents suggested that Labour would lose councils in the South owing to the anti-austerity message being viewed as irrelevant. There was also the suggestion that Labour would gain votes in the heartland of the North where it already controlled a great number of seats. It seemed that the pundits were wrong on both counts.

One thing is clear and undeniable. Jeremy Corbyn’s Labour has defied the odds at this election. It looks like the party will lose no more than 30 council seats and that its vote share on 2015 will be up by roughly 4 per cent at the expense of the Tories. People will rightly say that this is depending on the standard the results are measured by.

But I think that John McDonnell made a convincing argument last night on exactly how to judge this performance. Given that many simply want to spend time speculating about Jeremy Corbyn’s leadership it seems entirely reasonable to measure Labour’s success based on the party’s movement since he became leader. As mentioned above if this is taken as the standard Labour has increased its share of the vote and has beat the Tories after being some 14 points behind in the polls just a few months ago.

Commentators were arguing even at the point of polls closing that Labour would lose control of key councils such as Southampton, Harlow, Carlisle and Nuneaton. Yes – everybody remembers Nuneaton. But these predictions proved false. Labour did not just hold on to these areas but in a great deal of them the party increased its share of the vote and indeed its share of council seats. Labour has truly defied the odds across England.

The information that was shared in the weeks before the election on Thursday suggested that with Labour’s current position in the polls it would lose 170 seats. Some went as far as to suggest we would lose towards the 300 mark given the crisis Labour found itself enveloped in during the run up to voting. Opponents were kind enough to note that if we achieved parity with the Tory vote we would only lose 120 council seats.

While any loss is regrettable I have made my view clear on why Labour faced an uphill climb in these elections. Despite the rhetoric we have lost just over 20 seats. I agree with John McDonnell’s call this morning that it is time for the ‘begrudgers’ to ‘put up or shut up’. No wonder they are being so quiet.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.