• Home /
  • News / Mike speaks out on Tax Avoidance and Multinational Companies

Mike speaks out on Tax Avoidance and Multinational Companies

Check against Hansard for actual delivery: 

Mr Speaker

 

While today’s debate will mainly focus on the recent announcement by the Chancellor on the Google tax deal - it is important not to lose sight of the fact it came about because of the UKs tax treaty with Ireland. 

The Google tax scandal demonstrates that attempts to patch up the current international tax system are woefully inadequate. Despite the efforts of the OECD’s recent BEPS (Base Erosion and Profit Shifting) overhaul, it appears highly likely that corporate tax will continue to be an optional extra for profitable companies such as Google.

 

The UK’s tax treaties with developing countries can allow UK firms to limit their tax payments often in countries where the money is most needed to fund hard pressed public services.

 

According to the IMF recent calculations have shown that developing countries are losing around $200 billion a year to tax avoidance by companies.

 

The OECD has estimated that tax havens could be costing developing countries a sum up to three times the global aid budget.

 

The value of capital flowing out of countries is huge – an estimated $1trillion a year - put into context – Africa is a net creditor to the world.

 

According to Oxfam corporate tax avoidance in the form of trade mispricing by G7 based companies and investors cost Africa $6billion in 2010.  More than enough to improve the health care systems in the Elbola affected countries of Sierra Leone, Liberia and Guinea.

 

Then there are the sins of omission. Anonymous shell companies in the British Virgin Islands were used to acquire mining concessions in the Democratic Republic of Congo for $275million. They were then sold for $1.63billion costing the state $1.36billion or twice the combined health and education budget.

 

 

 

 

But what is to be done;

 

David Cameron is hosting an anti-corruption summit in May and inviting heads of state from all over the world to London.  But how can the UK lecture other countries on what they should be doing to tackle corruption, when the Crown Dependencies and Overseas Territories – our own constitutional backyard – are such notorious purveyors of secrecy?

 

Insist that multinationals publish basic accounts in every country they operate in. Country-by-country reporting would immediately identify where profits are being earned in one country, but booked on paper in a tax haven. It would be a powerful disincentive for profit shifting.

 

Clean up our own back yard, by making sure that British linked tax havens (the crown protectorates, like Cayman & Bermuda) can’t continue to act as conduits for global tax dodging – by insisting on much greater transparency, particularly around the real ownership of companies based in their territories.

 

Stop applying sticking plasters to a broken OECD tax rules and mandate the UN to develop a set of rules that ensure big businesses pay their fair share of tax in every country they do business in.

 

But Mr Speaker this is not an attack on companies per say -  9 out of 10 business back the tackling aggressive tax avoidance.

 

This is about the common good, creating a level playing field for all countries and companies. 

Do you like this post?

The Labour Party will place cookies on your computer to help us make this website better.

Please read this to review the updates about which cookies we use and what information we collect on our site.

To find out more about these cookies, see our privacy notice. Use of this site confirms your acceptance of these cookies.