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Government facing both ways on tax avoidance, cross-party MPs say

Published 04/08/2016

The Government's actions on global efforts to tackle tax avoidance are frustrating, says Dame Margaret Hodge
The Government's actions on global efforts to tackle tax avoidance are frustrating, says Dame Margaret Hodge

Britain has been a "difficult friend" of global efforts to tackle tax avoidance by multinational companies like Google, a cross-party group of MPs has said.

The all party parliamentary group on responsible tax, which is headed up by influential Labour MP Dame Margaret Hodge, called on the Treasury to annually assess the effect of cutting the corporation tax rate and introducing tax reliefs on avoidance.

Dame Margaret also described as "frustrating" the Government's failure to make overseas territories and crown dependencies, many of which are tax havens, follow Britain's lead in publishing company beneficial ownership registers.

This failure to introduce full transparency undermines the OECD's ( Organisation for Economic Co-operation and Development) plan to tackle profit shifting - when companies shift their profits to low tax or no tax jurisdictions in order to avoid levies, the MPs said.

Britain has publicly led on this work while undermining its effectiveness behind the scenes by defending schemes such as patent box relief, which has now been modified in response to concerns, but copied by other countries such as Ireland in a "race to the bottom", their report said.

"The Government has been facing both ways," Dame Margaret said.

"While publicly proclaiming their determination to tackle global tax avoidance, they have been encouraging these practices by changes they have made to the UK tax system and by refusing privately to agree to some key OECD proposals.

"Their unwillingness to get tough on our overseas territories and crown dependencies, home to a number of tax havens, by forcing them to introduce public registers of beneficial ownership is frustrating.

"The new Prime Minister must put an end to tax secrecy. The UK Government should take a leading role and introduce public country-by-country reporting.

"The UK Government should use the law to end the secrecy that encompasses tax havens.

"The Government should work internationally to create rules that are sustainable and that ensure tax is properly paid where value is actually added."

Charities called on Prime Minister Theresa May to take action. .

ActionAid's Barry Johnston said: "The new Prime Minister has said she will take on corporate tax avoidance.

"She'd do well to heed the recommendations of this far-sighted report as the UK redefines its global position.

"We urge the Prime Minister to take bold action to tackle British overseas tax havens, end the race to the bottom on corporate tax rates and stop companies artificially shifting profits around the world.

"This September's G20 meeting in China - May's first major summit as PM - provides the perfect opportunity for her to show she means business."

Oxfam's Sally Copley said: "The Prime Minister must go further than the previous government if she is to fulfil her ambitions to tackle tax dodging. As a starting point, she should deliver on the report's recommendations to make the UK's overseas territories and crown dependencies follow the same rules as the UK itself, and make British companies publish reports on their activities in every country where they operate."

Christian Aid's Toby Quantrill said : "This cross-party report is a gift to the government of Theresa May, who has criticised multinational tax cheats and said she wants to tackle corporate irresponsibility of the sort exemplified by British Home Stores.

"Theresa May's Government must prove it takes this issue seriously by adopting the proposals in today's report in full, and following through with determination."

A Treasury spokesman claimed the Government has " led a transformation" in global tax transparency.

He said: "The anti-corruption summit we held in May saw global agreement to automatically share information on who really owns companies and trusts, and because of our leadership HMRC will be begin receiving information on the accounts held in the crown dependencies and overseas territories by UK taxpayers one year earlier than the rest of the world.

"These are concrete measures that will help us clamp down on tax-dodging and illicit finance."

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