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Tax Avoidance and Evasion

There is a danger that we might be conflating two separate issues. In a communiqué put out immediately after the G20 summit, our Chancellor noted that leaders had agreed to""take action to protect the world's financial system and our public finances by cracking down on tax havens"." His statement made no mention of the need to take action to protect developing countries. Almost all the references in the Library paper prepared for today's debate relate to tax avoidance schemes in developed countries depriving the Exchequers of developed countries of funds. The first paragraph of the first article in the pack reads:""UBS yesterday defended itself against attempts by the US Internal Revenue Service to extract names of thousands of American customers holding offshore accounts, telling a federal court that matters should be resolved via talks between Bern and Washington. The beleaguered Swiss bank was responding to a legal challenge by the IRS to reveal the names of up to 52,000 accounts as part of the US administration's efforts to combat tax evasion."" There is not a scintilla of a quarrel—I suspect—between hon. Members about it being right for mature democracies, or indeed all countries, to bear down on tax evasion. However, in none of the briefings that I have been sent have I seen evidence supporting the suggestion that developing countries are losing huge amounts of revenue each year through commercial tax evasion. Not a single article in the Library pack gives any statistics or evidence in support of that suggestion. I am not saying that it is incorrect, but I am bemused. If we are not careful, this will become an article of faith, and the danger of such articles of faith is that they can be used as alibis in other ways. In other words, developed countries can say to developing countries, "Well, you would be in a much better position, and you would not need so much development assistance, if you had in place a better tax system, and if you were properly taxing companies doing business in your jurisdiction." As times start to get hard, the risk is that countries that signed up to the millennium development goals and increased development funding will seek to find such excuses. If it is to be asserted that developing countries lose large amounts of money through commercial tax evasion, it needs to be much more evidence-based. We then also need to consider how we can strengthen developing countries' tax systems and administrations through increased targeted aid. I find something else bemusing about this debate: I cannot recall having seen, in any of DFID's country plans—I stand to be corrected—a reference to enhancing the efficiency of Exchequers and Treasuries in those countries. Much work is being done on good governance, on bearing down on corruption, and on improving the judicial system, courts and general machinery of governance, but very little, as of yet, is being done on improving and strengthening developing countries' tax systems and administrations. As I said, I am slightly concerned that we are conflating two issues. If we are not careful, we will create an article of faith that says that huge amounts of revenue in developing countries are going missing, and we will give an alibi to developed countries to say, "If only developing countries sorted out their tax system better, they would not be in so much difficulty."