Shadow DfID statement on Government response to IDC report

Ivan Lewis MP, Labour’s Shadow International Development Secretary, responding to the Government’s response to the International Development Committee report on tax in developing countries said:

I am disappointed that the Tory-led Government has rejected the Select Committee’s recommendation to conduct an analysis of the financial impact of the revised Controlled Foreign Companies (CFC) rules on developing countries. On the one hand this Government claims to be committed to clamping down on tax dodging but at the same time it has introduced legislation that facilitates companies avoiding taxes in developing countries.

“With all the furore over corporate tax avoidance this week, it is disconcerting that the Government is so complacent about the impact of the rules governing Controlled Foreign Companies on the poorest countries in the world.

“Labour urged the Government to reconsider the impact of changes to CFC rules when they were being debated in Parliament, not least by tabling an amendment to the Finance Bill, but they pushed ahead despite advice to the contrary from NGOs, the IMF, the OECD and the World Bank. For all their rhetoric on tackling tax dodging the Government is failing to take the necessary action.

Parliament Committee backs call for Government to abandon plans to rob poor countries of tax revenue

The House of Commons International Development Committee have joined the calls on the Government to abandon plans that could rob poor countries of up to £4 billion in lost tax revenues.

LCID has been campaigning with Labour MPs and the charities ActionAid and Christian Aid against Osborne’s proposed changes to tax rules affecting UK-owned companies operating abroad – which could make it easier for them to use tax havens and reduce their tax liability in developing countries.

The International Development Committee called on the government to review the changes and called on them to designate a DFID ministerial responsibility for the development impact of tax and fiscal policy.

 

Rachel Reeves, Owen Smith and Catherine McKinnell in Labour’s Treasury team, Shadow Development Secretary Ivan Lewis, have been leading the fight against these changes – along with Sheila Gilmore who has been trying to pass an amendment to the Finance Bill as it passes through committee stage.

Rachel Reeves MP, the Shadow Chief Secretary and LCID Honorary Co-President, said:

“It is astounding that given the rhetoric coming from the coalition on tax avoidance, that despite warm words from Liberal Democrats, we were voted down by coalition MPs on this issue. Labour has been pushing for over a year for proper studies into the impact of these changes.”

Ivan Lewis, Shadow Development Secretary, said:

“George Osborne’s determination to press ahead with these changes makes a mockery of the Tory-led government’s commitment to tackling tax avoidance.

“Giving aid to developing countries with one hand while removing tax revenue with the other allows UK-based multinational companies to shirk their responsibilities at the expense of the poorest people in the world.

“Once again the Tories are demonstrating whose side they are really on.”

 

The real George Osborne

Guest post from the World Development Movement

‘New online comedy series about George Osborne,’ a colleague of mine said to two briefcase-clutching gents last week as she handed them a flyer outside the Treasury. ‘Ha, yes, we need that at the moment,’ replied one. ‘Just watch parliament TV, that’s a comedy featuring George Osborne,’ said his friend ruefully as the pair hurried up the stone steps.

Quite. But perhaps these two civil servants took a little light relief in the online comedy series ‘The Real George Osborne’ (http://therealgeorgeosborne.com/). The series stars Rufus Jones, who recently played Monty Python’s Terry Jones in the BBC 4 film Holy Flying Circus. Each episode is only 2-3 minutes long and the 14 part series follows Jones’s Chancellor takes street-dancing lessons, struggles with fad diets, and broadcasts Westminster secrets on his webcam after over indulging at the Bankers’ Ball.

The three-week online mini-series, which airs its final episode on Friday, is the latest campaign tactic being used by anti-poverty campaigners at the World Development Movement to draw attention to the role of investment banks and hedge funds in driving up global food prices through financial speculation.

Research shows how a dramatic rise in speculation in commodity markets has driven food prices up, and increased volatility, resulting in sharp spikes in the cost of staple foods like wheat and maize. In the last six months of 2010 alone, rising food prices pushed an extra 44 million people into extreme poverty.

In the series, George, with the help of his long-suffering adviser, attempts to win popularity and usurp Boris Johnson as ‘the most recognised Tory’. He is torn between wanting to be seen by the public to ‘do good things’ such as regulating financial speculation on food prices, and wanting to appease his banker pal Nat by leaving the banks unregulated and free to carry on reaping billions of pounds from speculation

Nat is played by Will Smith from the BBC’s political comedy, The Thick of It and in episode 10 (http://therealgeorgeosborne.com/blog/71) Nat threatens to withdraw his support for George’s political career unless the Chancellor abandons the idea of curbing food speculation. The slightly sinister tone of this episode particularly highlights the power of the financial lobby. The European Commission announced its proposals for regulation in October, and the coming months will see a series of debates, votes and plenty of horse trading before the rules are put into force. But the Conservative-led government, with its ear to the City of London’s lobbyists, has so far trenchantly opposed effective regulation.

The US has already moved to regulate food speculation through the Dodd Frank Act, passed last year – though Wall Street, like the City, is doing all it can to prevent the rules coming into effect. Strong regulation in Europe is essential to winning the battle on both sides of the Atlantic, since the absence of controls in Europe could see speculation simply shifting into the least regulated market.

The opportunity to tackle food speculation is now. Without political and moral pressure from the public and the opposition, this Government will be allowed to stand in the way of this vital regulation.

We’ve been campaigning long enough to know that producing evidence of the problem isn’t enough to change policy in the face of heavy lobbying from the financial sector. But we hope that making a topical and humourous comedy will help us to spread the word, send a message that the UK public won’t tolerate the banks gambling on food at the expense of millions of hungry people and make it a bit more difficult for the government to block the regulation that’s desperately needed.

George, we’re watching you.

Catch up on the whole series here

Taxing times: is anything wrong with tax avoidance?

Joe Stead, Economic Justice Adviser – Christian Aid writes on a discussion on tax, tax avoidance and efforts to fight global poverty held at Labour Party Conference at the end of September.

Now more than ever tax is a hot topic of political discussion, but being a hot topic can usually reduce discussion to a superficial level. At the Labour Party Conference, Demos, ActionAid and Christian Aid sought to redress that balance, with a panel discussion on tax, tax avoidance and efforts to fight global poverty.

While various NGOs, such as Action Aid and Christian Aid have been highlighting the cost of tax dodging to developing countries for some time now, such links are yet to translate into firm policy from the UK government. What we do in the UK in terms of our tax policies, and the type of tax policies that the UK supports at the global stage matters. At the moment the UK is part of the problem, and our approach needs reforming. Developing countries lose far more per year from tax dodging than they receive in aid, Christian Aid estimates the cost to be around $160bn a year. The only way developing countries will become sustainable economies, and people can escape poverty, is if they are able to stand up on their own two feet by having effective tax systems that can generate the money necessary to provide public services for all their citizens. Of course corruption is part of the problem, and domestic reforms are needed, but the problem goes wider than this.

At the discussion in Liverpool, there was, I think, rough agreement by the panel on that (myself from Christian Aid, Angela Eagle MP, Richard Murphy – Director Tax Research UK, and Graham Dale – Head of Public Affairs Institute for Chartered Accountants England and Wales). The panellists agreed there is a problem and, it seemed to me, we even got close to diagnosing what causes the problem: tax havens and a lack of transparency.

Tax havens allow people and companies to avoid paying tax. This means everyone else has to suffer a combination of higher taxes to cover some of the gap, and less funding in public services to cover the rest of the gap. Because tax havens keep details secret it is difficult for revenue services to track down money held in tax havens and tax it. This is challenging enough for the UK and our advanced revenue service, but as you can imagine, for developing countries the problem is even worse. An end to tax haven secrecy is what we need, but this will only come about by governments acting together, internationally to do so. The G20 agreed to do this at the London Summit in 2009, but it hasn’t happened yet. The current government, by concluding deals like the recent one with Switzerland, is giving the appearance of not caring about secrecy.
The problem of global tax dodging is exacerbated by the fact that multinational companies are able to use complex structures (including the use of tax havens) to dodge taxes. Because they are able to keep the details of what they do secret, again it is difficult to track what they are doing, and establish what taxes they should be paying. The solution is also more transparency: if countries reported their operations for each and every country they operated in then revenue services could have more information to do their job effectively. Crucially, also citizens in every country in which these companies operate in would be able to hold their own governments to account to ensure that multinationals operating in these countries play a constructive role in the development of their economies.

And this is where the discussion began to get interesting. What are the criteria by which we should judge multinationals? Some people will tell you that the actions of these multinationals are not illegal, that they are trying to maximise profits and remain competitive (that’s true in some cases, though there are also some practices that are illegal). But legal or not is it right? The only way I feel we can answer that question is if we are able to have a proper debate about it, not just at the fringe at the Labour conference but in Parliament, in the EU, in the G20, even the UN. But the only way we will be able to have a proper debate is if we have the information to do so. So long it is possible to hide behind tax havens and a lack of transparency it is possible to deny what is really going on, and so deny citizens the right to hold companies and governments to account.

There are competing interests of civil society and politicians, consumers and business, but the only way they can be resolved is by a transparent discussion . So the challenge to us all is to get that debate, to make sure this issue rises up the agenda. Labour were leading on this, at the London summit in 2009 which promised to tackle tax havens. But where is the Labour champion of this agenda now? Labour needs to demand more of the G20, to demand more of the EU, and especially demand more from government tax policies because of the impact that these could have on poor people round the world. We cannot entertain policies that sell out the poor; tax policies that have a potential impact on development must be scrutinised carefully.

I pay taxes not just because I have to, but because it gives me a vested interest in the society I am in, and a right to hold my government and elected officials to account on how they spend them. And I want them to spend some of my taxes and some of the time my taxes pay for on making sure many more around the world get to have the same opportunity.