Christian Aid is an admirable organisation by which I have been pleased to be lobbied many times – in Westminster, by postcard campaign and, last Friday, in the constituency, by lobbyists and local supporters who came to discuss its crusade to end tax secrecy.
Christian Aid would like to see an international agreement that forces tax authorities to exchange information about companies within their jurisdictions, effectively ‘outing’ users of tax havens.
A significant number of developing countries are missing out on much-needed corporate taxes because loopholes in international law allow multinational companies to continuously redistribute their assets and investments in order to avoid tax.
I am instinctively supportive of both the spirit and substance of Christian Aid’s proposals. It is intuitively wrong to transfer assets from developing countries into tax havens at below cost price – a practice known as transfer mispricing.
The UK’s spending on aid is firmly focused towards assisting recipient countries to help themselves – with the aim of ending their reliance on outside help. Christian Aid is absolutely right to point out that fairness in international tax affairs is a key part of enabling developing countries to move away from dependency on aid.
The Department for International Development has undertaken more than 200 tax-related projects across 44 countries in recent years and has a Tax Task Team that works to improve international collaboration on tax. This is in addition to specific projects such as supporting the Rwanda Revenue Authority, resulting in revenues increasing sixfold, and committing £97million in aid to promoting financial independence among aidreceiving nations.
However, we also have to recognise that there are factors at play that are beyond the reach of any single national government to implement.
International standards will need to be truly global – otherwise canny companies will simply move from haven to haven.
Backing from the big international regulators (OECD, IMF, World Bank etc) is essential to be able to seriously advance a radical reforming agenda on the international diplomatic stage.