A report out today from a cross-party committee of MPs, the International Development Committee (IDC), has recommended a range of proposals to make sure developing countries increase their resources from tax revenues. They also found that flagship tax proposals brought in at the last budget will hurt developing countries.
The IDC's report 'Tax in Developing Countries: Increasing Resources for Development' recommends that "the Government should consider whether to drop its proposals" if it finds that their impacts are harmful.
The recommendation concerns changes to the 'Controlled Foreign Companies' regime, which will make it easier for UK-headquartered companies to dodge taxes through tax havens. The committee’s report says that all new tax policy changes should be assessed for their impact on developing countries, and that a minister in the Department for International Development (DFID) should have responsibility for this.
Lucia Fry, Head of Policy at ActionAid said: "The International Development Committee has rightly recognised just how fundamental tax revenues are for developing countries. Tax avoidance is now a major global concern, and the UK needs to take into account the impact of its own tax regime on the world’s poorest countries. Tax revenues are the roots from which people in poor countries can prosper. This lost revenue could enable poor countries to put more teachers in schools and nurses in hospitals, as well as ultimately helping end aid dependency.
"We urge the government to take up the Committee’s recommendations in full. With people around the world feeling the effects of the financial crisis and rising food prices, the government must not let the grass grow under its feet. All changes to the tax regime must now be scrutinised for their impact on poor countries."
Notes to Editors
1. For more on the changes to Controlled Foreign Companies rules and their impact on developing countries read ActionAid’s Collateral damage report