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MPs Get It Right On Tax And Poverty

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The new parliamentary report on tax and global poverty might not sound like the most exciting read but when a colleague saw an advance copy earlier this week, he looked as if he had won the lottery.

Those of us who campaign for the powerful to pay their taxes are delighted with the cross-party MPs' report because it sets out the shocking facts on tax and poverty with admirable clarity. It also calls on the government to stop making excuses and get on with helping poor countries collect the taxes they're owed - action which will also help the UK itself fight the menace of tax dodging.

One of the most important facts the MPs have stated is that if developing countries are going to escape poverty and dependence on aid, then they need to get better at collecting the billions they're owed. At present, they lose some $160 billion a year as a result of tax dodging by multinational companies alone, according to an estimate by my employer Christian Aid. That's more than they get in aid from rich countries.

Of course tax dodging is also a multi-billion problem here in the UK, one which robs public services of funding and harms the millions of people who need health, education, police and so on. But poor countries have an even worse struggle because they're less able than the UK to compete with the expensive tax lawyers and accountants who help big companies shift their profits into tax havens.

In line with this, evidence gathered by the MPs during their inquiry shows that in general, the poorer the country, the less tax it collects. In the poorest, tax revenues make up just 13 per cent of Gross Domestic Product (GDP), while in rich countries like the UK, the figure is around 35 per cent.

Another reason for cheering the MPs is that their new report shows how the laws we create here in the UK affect poor countries' ability to collect their taxes. For instance, the MPs say the UK should stop waiting for other European countries to agree on new accounting rules for multinational companies and get on and make it harder for unscrupulous ones based in the UK to dodge tax.

Such rules, requiring companies to introduce so-called country-by-country reporting , would help our own taxman, as well as those in poor countries, to spot the sort of cynical accounting which very deliberately shifts profits into secretive tax havens.

The MPs also deserve credit for recognising that governments should be automatically sharing information about who owns what within their borders. This would make it harder for people and companies to 'hide' assets from the tax authority of one country by putting them in some other country.

The UK is in a very good position to push for such international co-operation, not least because next year it will hold the Presidency of the G8 group of powerful countries.
But as the new report shows, the UK can also help simply by ensuring that its own laws don't make life harder for poor countries' tax authorities. ActionAid has warned that the UK's recently passed rules on Controlled Foreign Companies may cost poor countries £4billion, for example. And, as the MPs point out, while the Government denies this, it has not done the analysis to prove its case.
Now parliamentarians are calling on it to do so urgently and - depending on the outcome - consider changing the new rules. This is very welcome, as is MPs' call for the Government to publish an assessment of proposed new tax laws on poor countries at the same time as the proposals themselves.

All in all then, MPs' new report is full of important facts and robust recommendations about how tax is vital to overcoming global poverty and aid dependence. Now we just need ministers to sit up and take notice.