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G8 members agree to clamp down on tax evasion

21 June 2013

PA

Scenic platform: the prime Minister holds a press conference on Tuesday, as the G8 summit on Lough Erne, near Enniskillen, in Northern Ireland, nears its end

Scenic platform: the prime Minister holds a press conference on Tuesday, as the G8 summit on Lough Erne, near Enniskillen, in Northern Ireland,...

THE Prime Minister won guarded praise from campaigners this week after securing a deal at the G8 summit in Enniskillen, Northern Ireland, to clamp down on tax evasion.

The Lough Erne Declaration, signed by all members of the G8, states that "tax authorities across the world should automatically share information to fight the scourge of tax evasion," and that "countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where."

It makes a third point: "Companies should know who really owns them, and tax collectors and law enforcers should be able to obtain this information easily."

On Saturday, Mr Cameron announced that in the UK this information would be held in a central registry, maintained by Companies House and accessible to law-enforcement agencies and tax authorities. Whether the register should be open to the public will be the subject of a consultation this summer.

The Bishop of Derby, the Rt Revd Alastair Redfern, said: "The Government deserves huge credit for its efforts in using its Presidency of the G8 to prioritise trade, tax and transparency. The Summit outcomes fall short of what many had hoped and campaigned for, but there has been progress nonetheless that needs to be celebrated."

Sally Copley, a spokeswoman for the coalition of UK aid agencies that make up the campaign Enough Food for Everyone IF (News, Comment, 7 June), said that the Lough Erne deal was "a step in the right direction", but that it left "unfinished business".

"It's progress that more tax authorities will know who owns phantom firms, so they can crack down on them, but a summit fo- cused on transparency can't justify keeping this information secret," she said.

Richard Murphy, of Tax Research UK, greeted the deal on multina- tionals' reporting to tax authorities as "a major step forward", but said that the plan regarding ownership of companies in the UK was "inadequate".

Before the summit, Mr Cameron also secured an agreement by the UK's overseas territories and Crown dependencies to sign up to the Multilateral Convention on Mutual Assistance in Tax Matters, an initiative led by the Organisation for Economic Co-operation and Development (OECD) to clamp down on tax evasion. Territories, including the British Virgin Islands and Bermuda, will have to share only information that they already collect, and the registers will not be public.

Jenny Ricks, of the IF campaign, said that Mr Cameron had "cleared a big obstacle to a clampdown on tax-dodging" by securing the deal, which would "help developing countries access more information and retain more of the money they are owed".

Murray Worthy, of War on Want, said that, if all of the promises in the Declaration were fulfilled, they could have an "enormous impact on tackling one of the greatest scandals of our time. . . Today, all we have is a general statement of principles with no detail and no deadlines." A public register of the owners of companies would have been a "serious blow to tax havens' secrecy", he said.

Aimee Manimani, of World Vision DRC, said: "In order for today's commitments to truly benefit children in the Democratic Republic of Congo, among others, who have the most to gain from greater transparency, and whose futures are currently being extracted along with their mineral wealth, we need to see these ideas made real."

The Lough Erne Declaration states that "Developing countries should have the information and capacity to collect the taxes owed them - and other countries have a duty to help them."

Research by Action Aid suggests that 98 of the companies in the FTSE top 100 use tax havens. On Sunday, a letter signed by 1500 business groups and companies called for the register of ownership to be made public.

A new Christian Aid report, on behalf of the IF campaign, Invested Interests: The UK's Overseas Territories' hidden role in developing countries, argued that the British overseas territories and Crown Dependencies are "at the centre of a global financial system that encourages crime, corruption, and aggressive tax-avoidance in developing countries".

The report, published on Friday, argues that investment is often structured through these jurisdictions "specifically to enable tax- dodging in poor countries". Other abuses they facilitate include the laundering of crime money, and "round tripping", in which money originating in the developing country where it is to be invested is sent offshore, and then returned disguised as foreign funds to qualify for tax breaks.

On Sunday, at a special service organised by the IF campaign at St Macartin's Cathedral, Enniskillen, the Archbishop of York, Dr Sentamu, suggested that, if big companies could be stopped from "dodging taxes in the Two-thirds World", millions of people could "free themselves from hunger".

"They're dodging millions of pounds every day," he said. "Indirectly robbing the poor of education, health, food, employment, and sustainable development. . . They are not only robbing people, but God himself."

AIMEE MANIMANI, who works for the Christian relief agency World Vision Congo (DRC), came to the UK during the G8 summit to help raise awareness of how international policy is linked to the reality of where she lives.

The citizens of the Democratic Republic of Congo (DRC) are sitting on an estimated £15-trillion of mineral wealth, yet the majority do not benefit from it.

Ms Manimani said during her visit: "In order for the G8 commitments to truly benefit children in the DRC - who have the most to gain from greater transparency, and whose futures are currently being extracted along with their mineral wealth - we need to see these ideas made real.

"While mining can bring in money for governments, without full financial transparency, the benefits of this aren't felt by the population. Most importantly, citizens must be enabled to hold their governments to account."

Mining is an issue in more than 50 countries where World Vision works; so we know how critical it is for local communities to access this money so that they can provide health and educations services. The charity has been working closely with the Enough Food for Everyone IF campaign (News, Comment, 14 June) to help the international community make the link between tax-dodging and hunger. Without enough revenue, the poorest countries can do little to tackle under-nutrition among their citizens.

The test of this year's G8 summit was whether they agreed to an ambitious plan to tackle tax-dodging that could benefit all countries. Specifically, they had to agree to shine a light on phantom firms, and support a new standard on tax-information exchange.

The commitment to create new mechanisms to exchange information for the benefit of poor and rich alike is the right ambition, but we need a clear timeline, says the IF campaign.

Sarah Wilson is Senior Emergencies Specialist at World Vision UK.

 

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