Tax changes being brought forward in the Budget could result in tax losses of £4 billion a year for poor countries and £1 billion for the UK.
Yesterday ActionAid released a new report, detailing how tax changes being brought forward in the Budget could result in tax losses of £4 billion a year for poor countries and £1 billion for the UK. These changes will make it much easier for multinational companies to use tax havens to dodge their bills, particularly in the developing world.
Not only will this make it much harder for poor countries to become independent of international aid, these rule changes are totally contrary to the rhetoric from all parties on the importance of cracking down on tax avoidance.
Indeed, there’s strong support from voters of each of the main political parties for the government to take further action to stop large companies dodging their taxes.
YouGov polling (pdf) for ActionAid showed 74% of Conservative voters, 83% of Labour voters and a huge 87% of Lib Dem voters want the government to do more. Just 14% supported the proposal to water down UK anti-tax haven rules.
In a response to ActionAid, the Treasury’s main argument was “The Controlled Foreign Companies (CFC) rules are designed to protect the UK tax base from artificial diversion of profits.”
This dodges the key point we’ve been putting to them for the last two years. The current effect of the UK’s anti-tax haven rules protects both the UK and the developing world from tax avoidance by multinationals.
It’s true that protecting poor countries isn’t their main purpose, but it is a very positive side effect the government can’t ignore. Unless there’s a rethink developing countries risk becoming collateral damage as a result of these rule changes.
ActionAid is asking the government to do a full impact assessment, and then help developing countries to mitigate any effects.
In November last year, the IMF, OECD, UN and World Bank called on G20 countries to undertake exactly this type of “spillover analyses” when counties like the UK make changes to their tax laws like this.
Labour too has criticised the government’s plans. The shadow exchequer secretary, Owen Smith complained that: “In last year’s finance bill, Labour urged the government to provide a full impact assessment of the effect of the CFC changes on developing countries. In addition to repeating this call, we shall also be asking the government for assurances that the changes won’t cost jobs at home and won’t facilitate tax avoidance abroad.”
Before these rule changes make it into law, they’ll be debated and scrutinised as part of the Finance Bill.
For the sake a millions of hardworking people, who pay their taxes around the world, the government must urgently rethink its proposals.
• The Osborne tax get out turns aid for the poorest into a subsidy for multinationals – Daniel Elton, March 7th 2012
• Tories delay enshrining 0.7 per cent target in law. Again. When will they legislate? – Shamik Das, February 2nd 2012
• East Africa famine: We need funds now, and to deal with underlying problems –Katherine Nightingale, July 22nd 2011
• Disasters Emergency Committee needs to start coordinating Africa crisis response – Lord Avebury, July 7th 2011
• New day of action against tax avoiders planned – Shamik Das, January 14th 2011
As you’re here, we have something to ask you. What we do here to deliver real news is more important than ever. But there’s a problem: we need readers like you to chip in to help us survive. We deliver progressive, independent media, that challenges the right’s hateful rhetoric. Together we can find the stories that get lost.
We’re not bankrolled by billionaire donors, but rely on readers chipping in whatever they can afford to protect our independence. What we do isn’t free, and we run on a shoestring. Can you help by chipping in as little as £1 a week to help us survive? Whatever you can donate, we’re so grateful - and we will ensure your money goes as far as possible to deliver hard-hitting news.