BRITAIN will use its year-long presidency of the G8 group of rich nations to push for global action against tax evasion and “aggressive” tax avoidance by wealthy individuals and businesses, Prime Minister David Cameron has pledged.
In a speech to the World Economic Forum in Davos, Switzerland, Mr Cameron said abuse of tax systems was “an issue whose time has come”. He wanted to make sure individuals and companies “pay their fair share”.
In an apparent swipe at Starbucks, whose failure to pay corporation tax in the UK over three years sparked widespread outrage, Mr Cameron said it was time for businesses to “wake up and smell the coffee” over public anger at tax-avoidance practices, which in some cases had raised ethical issues.
Speaking to an audience of world leaders, business figures and non-governmental organisations (NGOs) in the Swiss ski resort, Mr Cameron said he also hoped the UK’s G8 presidency this year would “put turbo-boosters” under the issue of transparency in developing world economies.
Greater openness about who owns companies and land, and the movement of assets and money, has “staggering” potential in the fight against poverty, by ensuring a country’s resources benefit its people and not just a super-rich elite, he said.
Announcing his plans for the G8 to “drive a more serious debate on tax evasion and avoidance”, Mr Cameron said: “This is an issue whose time has come. After years of abuse, people across the planet are calling for more action and, most importantly, there is gathering political will to actually do something about it.
“There’s nothing wrong with sensible tax planning, and there are some things governments want people to do that reduce tax bills, such as investing in pensions, start-up businesses or charities. But some forms of avoidance have become so aggressive that I think it is right to say these raise ethical issues and it’s time to call for more responsibility and for governments to act accordingly.”
The Prime Minister went on: “I’m a low-tax Conservative, but I’m not a companies-should-pay-no-tax Conservative. Individuals and businesses must pay their fair share.
“Any businesses who think that they can carry on dodging that fair share or that they can keep on selling to the UK and setting up ever more complex tax arrangements abroad to squeeze their tax bill right down – well, they need to wake up and smell the coffee because the public who buy from them have had enough.”
Poor business practices not only deprived the public sector of the revenue it needed to fund essential services, but also harmed responsible firms, he said.
“When one company doesn’t pay the taxes they owe, then other companies end up paying more,” he said.
“When some cowboys play the system, all businesses suffer the fall-out to their reputation. That’s why it’s not just those in the NGOs who have been lobbying my government on these issues, it’s those in the high-rises of the City of London – bankers, lawyers, senior figures in finance.
“They’ve told us to pursue this agenda hard, and that’s what we’re going to do.
“Speaking out on these things is not anti-capitalism. It’s not anti-business … this is about me and all the other G8 leaders being able to look our people in the eye and say that, when they work hard and pay their fair share of taxes, we will make sure that others do as well.”
Mr Cameron revealed that Oxford University economist Paul Collier – author of an influential reassessment of aid policy in his book The Bottom Billion – had been advising the government on its priorities for the G8.
He said transparency would be a big part of the G8 agenda, “shining a light on company ownership, land ownership and where the money flows from and to”.
While aid would continue to play an important role in development, Mr Cameron said he wanted to “move the debate on, so we’re not just dealing with the symptoms of poverty but tackling the causes”.
Economies and societies in the developing world needed not just aid cash from the rich to thrive, but a “golden thread” of the rule of law, the absence of conflict and corruption, the presence of property rights and strong institutions, he said.
“Now, as co-chair of the UN High Level Panel and with the presidency of the G8, there is a chance to put turbo-boosters under this agenda and we’re seizing that chance,” Mr Cameron said.
“I want this G8 to lead a big push for transparency across the developing world.”
He pointed to a recent transparency initiative in Nigeria, which uncovered a £500 million gap between companies’ payments and government receipts for oil, and led to new regulations to ensure the country’s oil wealth benefited its people.
Mr Cameron said: “The potential is staggering. Last year, Nigerian oil exports were worth almost $100 billion [£63.3bn], more than total net aid to the whole of sub-Saharan Africa.
“Put simply, unleashing the natural resources in these countries dwarfs anything aid can achieve – and transparency is critical to that.
“So we’re going to push for more transparency on who owns companies, on who’s buying up land and for what purpose, on how governments spend their money, on how gas, oil and mining companies operate, on who is hiding stolen assets and how we recover and return them.”
The Prime Minister went on: “We can be the generation that eradicates absolute poverty in our world.
“But we’ll only achieve that if we break the vicious cycle and treat the causes of poverty, not just its symptoms.”
Responding to Mr Cameron’s speech, Oxfam chief executive Barbara Stocking said: “I am delighted the Prime Minister made such a strong moral case against tax avoidance in both the UK and developing countries.
“There can be no moral justification for companies wriggling out of paying their fair share to society .
“Every pound of tax companies avoid paying to poor countries is one pound lost to the fight against hunger.
The fact that tax-dodging costs poor countries $160 billion a year, while one in eight people in the world does not have enough to eat, is nothing short of a scandal.”