The International Development select committee has published the government’s response to its report on tax in developing countries. Until recently, the inquiry had provided us with the most interesting case of MPs questioning multinational businesses on their tax affairs all year. I’ve followed it with interest, giving evidence to it on behalf of ActionAid in February, so I was interested to see what the government had to say. I’m not covering everything here, just a couple of bits that leaped out at me.
More technical support for tax authorities in developing countries
“[T]here is a good case for scaling up DFID’s [the Department for International Development‘s] technical assistance work with revenue authorities in developing countries,” says the response, and “detailed proposals” are being drawn up. The section discussing this doesn’t actually mention that more money will be spent on this area, but that’s implied by the text. What’s interesting is that HM Revenue & Customs and DFID country offices are the only delivery agencies mentioned. The government isn’t promising to make additional funds available for multilateral organisations that work with developing countries on tax, such as the World Bank, IMF (whose large tax trust fund didn’t receive a UK donation), OECD or African Tax Administration Forum. This suggests that any ‘scaling up’ is likely to be quite modest in the global context.
What the government really thinks about FATCA…
The Committee had recommended that the government pass legislation similar to that in the US, which requires other countries to supply tax exchange information on US citizens automatically. The government has demurred on this recommendation, of course, but its response is quite interesting.
First, it is more critical of the US approach than we might expect:
FATCA is unilateral and extraterritorial in its approach and has created significant difficulties for the US as well as affected countries in its implementation.
…and tax information exchange with developing countries
Second, there’s a remark about developing countries that I found striking:
An example very relevant to developing countries is the promotion of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which provides a very cost effective way to access the benefits of information exchange. The UK, as a party to the Convention, has sought to ensure that the criteria for joining the Convention are such that they do not act as a barrier to entry to developing countries. The aim of this overall approach is to develop a comprehensive network of tax information exchange agreements which will enable the UK, and others to gain access to relevant information held in other jurisdictions.
That last sentence is an interesting turn of phrase. Taken on face value, it suggests that, to the extent that the UK is supporting developing countries to join the convention, this is primarily to enable it to gain information from them, rather than to help them access information from the other parties to the convention. Of course, we shouldn’t read too much into a single sentence, and I suppose the government would argue that this is a win-win for the UK and for developing countries. But as the UK ‘scales up’ its technical assistance for developing countries, it’s worth bearing in mind that it does have its own agenda, too.