Global poverty – DFID white paper on country-by-country tax reporting
The UK government is discussing with international partners whether initiatives including country-by-country reporting of tax payments "could offer an effective and suitable means of advancing the tax transparency agenda". This is good news. The announcement follows DFID's publication of a report that suggested that many estimates of revenue lost to developing countries due to tax evasion and avoidance were not based on reliable data. But that report also made it clear that further research is needed, and it recommended a number of possible directions for further research to "improve our understanding of tax avoidance and evasion and the implications of these activities for revenue mobilisation in developing countries". The World Bank and others have left it to a handful of committed individuals and a few NGOs to provide the only meaningful research available so far.
Yesterday's white paper Eliminating World Poverty: Building our Common Future said this about taxes:
1.28 Our common prosperity depends on shared, sustainable growth. Britain's fastest growing export markets are low and middle income countries. Today there are more middle income people in India than the entire population of the United States. We all suffer from weak financial regulation, the financial impact of imbalances in trade, and the action of tax havens.
2.1 It is easy to see why growth matters. It creates the livelihoods that support growing populations. Higher incomes lead to a reduction in infant deaths, increased school enrolment, and give us greater freedom to make our own decisions about our lives. Growth provides the tax revenue for states so they can fund public services, build accountable government and reduce reliance on external support. Growth provides countries and individuals with a ladder out of poverty.
2.9 ... Ineffective taxation undermines countries' ability to provide the basic services that underpin fairness as well as growth.
2.34 ... We will help countries establish sound taxation systems [and] make it easier for developing countries to benefit from the new co-operative tax environment.
2.44 Prosperity is not just a matter of good economic policies. A fair and sustainable market economy depends on an effective state and strong political commitment. Without this enabling environment, individuals and firms will have no confidence to invest for the future.
2.45 The UK has supported improved governance for more than a decade. It has never been more important than in this downturn and recovery. Systematic political economy analysis is needed to inform our approach to growth, to identify policies that have broad political support. This is particularly important in fragile and conflict-affected countries.
2.46 Effective tax systems are central to effective states. Raised in ways that encourage economic growth and promote political accountability, taxes provide the resources to fund public services, leading to an eventual exit from aid dependence.
2.47 The UK will consult on a proposal to create a new International Taxation Centre to improve research in this area. The Centre would be a partnership hosted by a research institution and would work with international partners such as the International Tax Dialogue. It would help developing countries build the legitimacy and effectiveness of their tax systems.
2.48 There is increasing concern that tax systems in developing countries are undermined by international banking secrecy, including in tax havens. The London Summit made real progress on this issue, and the UK will work to ensure that the commitments on standards and sanctions are met, as well as the decision to develop proposals by the end of 2009 to make it easier for developing countries to benefit from the new co-operative tax environment.
2.49 The UK believes it is important for all jurisdictions to implement their commitments to the international standard for the exchange of tax information and will work in particular with its own Crown Dependencies and overseas territories to ensure that they can meet or exceed the agreed international standards.
2.50 Along with other members of the G20, the UK is ready to take action against jurisdictions that do not meet these international standards. CDC, which has sought to avoid unco-operative jurisdictions in the past, will in future only commit capital to new funds and direct investments in jurisdictions substantially implementing the international tax standard. CDC will also continue to invest directly in the developing countries they are trying to help. CDC will review all existing investments in jurisdictions committed to, but not yet implementing, the international tax standard, following the next G20 Summit in September 2009.
2.51 In addition the Government is discussing with its international partners whether other initiatives, including country-by-country reporting of tax payments, could offer an effective and suitable means of advancing the tax transparency agenda.
