Conclusions and recommendations
Country-level tax policy
1. If developing countries
are to improve their collection of tax revenues, it is imperative
that elites within those countries pay the correct amounts in
personal income taxation, and—critically—are seen
to do so. (Paragraph 8)
2. DFID should seek
to support the national revenue authorities of developing countries
as they attempt to improve the collection of personal income taxes,
VAT and local property taxes. DFID should also encourage and support
programmes that engage civil society and trade organisations,
academics, journalists and parliamentarians in the tax policymaking
process. (Paragraph 13)
3. We urge DFID to
stress—in its dealings with the national revenue authorities
of developing countries—the importance of making corporate
accounts available to the public. In Zambia, to test the allegations
that the process is not working at present, DFID should request
access to the accounts of some of Zambia's main corporations,
using channels available to the ordinary Zambian citizen. In its
response to this report, the Government should notify us of the
outcome of these requests. (Paragraph 25)
4. The Government
should encourage the OECD and other standard-setting fora to require
the filing of public statutory accounts in all jurisdictions.
The Treasury should also press Crown Dependencies to meet these
standards. (Paragraph 26)
5. DFID should support
the governments of developing countries as they seek to incentivise
hitherto unregistered enterprises to join the formal, taxpaying
economy. (Paragraph 32)
Global Level tax Policy
6. We recommend that
the Government introduce legislation similar to the relevant section
of the US Foreign Account Tax Compliance Act (FATCA), requiring
tax authorities automatically to exchange information relating
to UK citizens or corporations. The Government should also use
its influence (via the OECD Tax and Development Task Force, and
similar avenues) to persuade other governments to follow suit.
(Paragraph 41)
7. To help developing
country revenue authorities to tackle transfer pricing abuse,
DFID should stress—in its dealings with these revenue authorities—the
importance of requiring 'related party transactions' (i.e. transactions
taking place within the same corporation) to be declared on annual
tax returns. (Paragraph 48)
8. In order to understand
the perspective of multinational businesses on transfer pricing
issues, HMRC should meet the CBI to discuss the issue. HMRC should
also seek the views of trade unions and civil society organisations.
HMRC should report back to the Committee before the end of 2012
to advise us of the outcome of these discussions. (Paragraph
49)
9. As a matter of
urgency, the Government should conduct or commission an analysis
of the likely financial impact of the revised Controlled Foreign
Companies rules on developing countries. Depending on the results
of this analysis, the Government should consider whether to drop
its proposals. (Paragraph 55)
10. The Government
should designate a DFID ministerial responsibility for the development
impact of tax and fiscal policy. Furthermore there should be an
administrative or legislative requirement for the government to
assess new primary and secondary UK tax legislation against its
likely impact on poverty reduction and revenue-raising in developing
countries, and to publish that assessment alongside the draft
legislation. (Paragraph 56)
11. Given that the
UK was involved in founding the Extractive Industries Transparency
Initiative (EITI), we feel that it should now become an EITI candidate
itself. Additionally, the UK should encourage EITI to broaden
its scope: EITI should require participating corporations and
governments to publish the contracts which exist between them,
and should also require the publication of percentage figures
in addition to absolute figures. (Paragraph 62)
12. Irrespective of
whether EU-level agreement is reached, the Government should
enact legislation requiring each UK-based multinational corporation
to report its financial information on a country-by-country basis.
Such information should include the names of all companies belonging
to it and trading in each country, its financial performance in
each country, its tax liability in each country, the cost and
net book value of its fixed assets in each country, and details
of its gross and net assets in each country. Additionally, the
UK should continue to support the progress of similar legislation
at EU level. (Paragraph 66)
UK Government's work on tax in developing countries
13. We re-iterate
our earlier recommendation, made in our Report on CDC last year,
that the tax payments made by CDC's fund managers and investee
companies should be published annually on a country-by-country
basis. If certain fund managers or investee companies are unwilling
to agree to this, CDC should use alternative companies which are
willing to be more co-operative. (Paragraph 71)
14. We recommend
that DFID scale up its technical assistance work with the national
revenue authorities of developing countries. (Paragraph 75)
15. We recommend
that HMRC be provided with additional funding, to allow it to
scale up its own technical assistance work with developing country
revenue authorities. (Paragraph 80)
16. The UK Government
should improve its reporting on its technical assistance on tax
and development, reporting cross-departmentally and at a project
level on work in this area. (Paragraph 81)
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