George Osborne in pledge to help world's poor fight tax abuse

Chancellor reaffirms promise on aid and pledges to join forces with the developing world to help beat 'corporate cheats'

The Guardian, The Observer, Daniel Boffey, policy editor, Saturday 16 February 2013

George Osborne has pledged to drive forward a 'new agenda of transparency'.
Photograph: Olivia Harris/Reuters

The chancellor George Osborne has pledged to join forces with the developing world to crack down on multinationals avoiding tax in some of the world's poorest countries.

Fresh from the G20 meeting of finance ministers in Moscow, Osborne reveals in the Observer that the UK wants to rewrite the rules of the corporate game to help developing countries collect the tax that is due to them.

In remarks hailed by anti-poverty campaigners, he promises to drive forward a "new agenda of transparency" and to force oil, mining and gas giants to publish key financial data project-by-project wherever they operate.

He also reasserts the UK's goal of being the first country to spend 0.7% of its gross national income on aid next year, and reveals that a major spending focus is on improving the capacity of developing countries to hold corporate giants to account.

Writing in this newspaper Osborne makes it clear that while it is important to force multinationals such as Starbucks and Amazon to pay their tax bills in the UK and the rest of the developed world, it was the world's poorest who often needed the greatest help.

The chancellor, who also announced that he will lead a new G20 transfer pricing group examining how to stop firms shifting their taxable profits from country to country, writes: "Next year, we will have met the international commitment to spend 0.7% of GNI on overseas aid, the first country in the G20 to meet it. It's a historic moment for Britain. We should feel proud of that, as a nation, and it's a proud moment for me as a Conservative. We have not turned our backs on the poorest countries in these tough times.

"Our investment means 11 million children will go to school, 55 million children will be vaccinated against preventable diseases and we will stop 250,000 newborn babies dying needlessly. But it will also help developing countries to build capacity to govern their countries effectively – and tax collection is a crucial part of that."

Osborne makes his intervention following the Observer's revelation last week that Associated British Foods, the owner of brands including Silver Spoon sugar and Primark, has avoided paying millions of pounds of tax in an African state blighted by malnutrition.

The Zambian sugar-producing subsidiary of Associated British Foods, a FTSE100 company, contributed virtually no corporation tax to the state's exchequer between 2007 and 2012, and none at all for two of those years.

The company benefits from generous capital allowance and tax-relief schemes in Zambia, but an investigation by ActionAid also found that it legally funnels around a third of its pre-tax profits to sister companies in tax havens, including Ireland, Mauritius and the Netherlands, which it says is used to pay for genuine services.

Osborne commends this newspaper for highlighting the problem of tax avoidance in the developing world and vowed that the UK would use its position as host of the G8 meeting of world leaders this summer to promote "transparency and accountability in developing countries".

He writes: "We're taking action through the G20. But the problem goes much wider than the 20 major economies it represents. Last week, the Observer launched a debate over the specific problem of tax avoidance in developing companies.

"You are right to highlight this: often the poorer a nation is, the more they need the tax revenues, but also the weaker their capacity to tackle tax avoidance effectively.

"We will use the G8 to drive greater transparency as part of ensuring that revenues from oil, gas and mining can help developing countries to forge a path to sustainable growth, instead of fuelling conflict and corruption."

His comments come as research group Platform is due to publish a report on the tax records of major oil firms including Shell, which in 2005 moved the intellectual property ownership of its own brands to a subsidiary in Switzerland.

Chris Jordan, ActionAid's tax specialist, said: "George Osborne's clear commitment in today's Observer to help the world's poorest countries tackle corporate tax avoidance is a stunning development."

"Fresh thinking on this issue is long overdue and as Osborne realises tweaking the current system will not be sufficient to ensure both rich and poor countries benefit."

Adrian Lovett, Europe executive director of ONE, a grassroots campaign group, applauded Osborne's reaffirmation today of the UK's aid spending but warned the chancellor that oil, gas and mining firms would seek loopholes in any new transparency regimes.

Meanwhile, on Wednesday Nick Clegg will use a speech in front of a city audience at Mansion House to call for the UK financial services to invest in the north of England as part of an effort to rebalance an economy overly dependent on London's affluence. The deputy prime minister will say: "Crucially, growth outside the capital strengthens London too. Their burgeoning private sectors are your customers. The firms in need of financial and professional services. And their breakthroughs are your gains."

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