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Tax Avoidance

Volume 564: debated on Wednesday 12 June 2013

1. What proposals her Department has to tackle tax avoidance by multinational companies operating in developing countries. (159145)

The UK Government are committed to ensuring that developing countries have the ability to collect the tax that they are owed. The UK is using our G8 presidency to promote tax transparency, tackle tax avoidance and ensure tax compliance.

The Secretary of State will be aware that developing countries lose more than £160 billion each year through tax avoidance, more than one and a half times what they receive in aid. What is she doing to ensure that we get country-by-country reporting so that we see how much those multinationals are taking from developing countries?

Addressing tax avoidance and encouraging tax compliance will be one of the key elements of the G8 agenda, and transparency sits alongside that. We will look at how we can obtain more transparency, including sectoral transparency through measures such as the extractive industries transparency initiative. All those measures together have the potential to ensure that we can help developing countries to collect the tax they are owed.

Does my right hon. Friend agree that developing countries will be able to end their dependence on aid only if they can raise enough revenues through the tax system?

My hon. Friend is absolutely right. If we are to have sustainable development and developing countries are to have the tax revenues to fund and invest in their own public services, we need a thriving economy that creates those revenues. That is why economic development is such a key part of what my Department is now focusing on. Along with Her Majesty’s Revenue and Customs, we are investing to ensure that developing countries have the tax expertise they need to collect the taxes that are due.

I back the call from my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) for country-by-country reporting by all multinational companies. Can the Secretary of State guarantee that no money from DFID goes to any organisation or company that is not fully tax transparent?

We are very clear that we want companies to behave responsibly across the board, including on tax, and I can assure the hon. Gentleman that there is such due diligence. We cannot simply ignore those problems, and if we are to shape private sector investment in the developing world so that it can help drive development, as I think we should, we will have to engage with the private sector more in the future than we have in the past.

The Secretary of State will know that the OECD has been charged with coming up with a scheme to tackle base erosion and profit shifting and to consider corporate taxation. Last week in a meeting with the organisation it confirmed to me that it is working to a timetable of just two years. Does she agree with that timetable, or does she agree with me that it is an over optimistic timetable for trying to get a multilateral convention to replace 3,000 tax treaties?

My right hon. Friend is right that the timetable is ambitious and that is why we need to put the political momentum behind it that the G8 meeting can bring. The work that the OECD is doing has been commissioned by the G20 and it shows that if we are to reach a sustainable solution, leading economies and world leaders must come together. That is precisely why we have put the subject on our G8 agenda.

The Prime Minister and the Secretary of State have said that the main objective of this weekend’s summit on tax and transparency and next week’s G8 meeting is for G8 countries to put their houses in order. That would strengthen the moral authority of the G8 and send a strong message to the rest of the world that the time has come to get serious about tax dodging. Will the Secretary of State ask the Chancellor today to bolster the Prime Minister’s moral authority and undertake an urgent review of the changes he made to the UK’s controlled foreign company rules, which are estimated to have cost developing countries £4 billion in lost tax revenue?

I should have thought that the hon. Gentleman would ask me about the success of the G8 event on nutrition we held last Saturday, which saw huge progress on providing funding for that issue. Let me answer the question he has asked, however. I reassure him that we are taking a structured approach to the discussions at the G8. We are looking at addressing tax avoidance—in other words, dealing with the problem. We are looking at developing better approaches to tax evasion—in other words, once the problems happen we need to ensure that we can sort them out. We are also looking at how we can ensure that developing countries, once they have made progress, are in a position to collect tax. Our Government has put the question on the agenda and I think the hon. Gentleman should congratulate us on that.

I do not know about tax dodging but the Secretary of State is getting a reputation for question dodging—we will try this one, Mr Speaker. The Government have identified the public registration of beneficial company owners as one of their top priorities for the G8. There can be no excuse for this basic information about company directors being shrouded in secrecy. Does that remain the Government’s priority? Will she confirm that if they are unable to secure agreement, the UK will take unilateral steps on the issue of public registration?

We have made beneficial ownership one of the key elements of our G8 agenda, and it is right to do so. I do not recall the hon. Gentleman’s Government particularly pushing on the issue during their 13 years in office. I can assure him that the best way to make a difference for developing countries is to get international agreement. That is what they want and that is why we are trying to get it.

In the light of the Select Committee on International Development’s recent report, and following the election, will the Secretary of State engage with the Government of Pakistan to ensure that Ministers, MPs and the leaders of the community there pay their fair share of taxes to match the contribution that British development aid is making to Pakistan?

We have a question on the Order Paper later about Pakistan, Mr Speaker. I have already spoken with Ministers in the Pakistani Government, and the Committee’s report was right to highlight this issue.