David Cameron has been warned that his plan to crack down on tax avoidance at next week’s G8 summit will benefit the world’s richest nations but could “freeze out” the poorest countries.
In a letter handed to all G8 leaders, seen by The Independent, an alliance of 184 pressure groups claims the Prime Minister’s proposals could result in a “two-tier” system which allows advanced economies to share tax information on companies and individuals but excludes developing nations.
Although the US and EU want to include all countries eventually, some nations are arguing tax secrets should not be exchanged automatically with the developing world. The letter warns: “Excluding developing countries that wish to join such an international system – either directly or de facto through an unfeasible burden of immediate reciprocation of information – would in many cases freeze out those countries worst hit by tax avoidance.”
Soren Ambrose, a spokesperson for ActionAid International, one of the signatories to the letter, said: “We are at risk of a cosy deal between tax havens and rich countries which sees developing countries shut out. This would be a betrayal of ordinary people in poor countries which desperately need tax revenues to fund schools and hospitals rather than being siphoned into tax havens. The G8 must act now to make sure that poor countries are at the heart of, not outside of, any global crackdown on tax dodging.”
The groups fear this could result in new secrecy regimes in nations excluded from the “top tier”. They pleaded with G8 leaders to commit to a global tax information system open to all countries from the outset.
Ed Miliband has expressed similar fears. Writing in The Independent, the Labour leader said: “Tax information must be shared properly with developing countries which lack the data and resources needed to track money being funnelled out of their economies. Any new deal for sharing tax information at the G8 must include poor countries from the start.”
Mr Cameron and the Chancellor George Osborne want the new system open to all countries. A Treasury spokesman said: “The new global standard we are asking the G8 to agree to should be for developed and developing countries alike.”
Today Mr Cameron hopes to put Britain’s own house in order by persuading the 10 tax havens under its control to join the existing tax information-sharing regime in talks at Downing Street. They include the Cayman Islands, British Virgin Islands, Bermuda, the Isle of Man, Jersey and Guernsey.
In a speech today, the Prime Minister will admit that generous aid programmes have failed to tackle the root causes of poverty in poor countries – corruption, weak governance and institutions which lead to conflict and violence.
Mr Cameron will say: “For too long the international community has shied away from condemning the appalling corruption and mismanagement of resources and the fundamentally bad governance that is destroying lives in some developing countries.
“Corruption is wrong. It starves the poor. It poisons the system. It saps the faith of people in progress. It wrecks the case for aid... But by ending the era of tax secrecy and driving real openness over what governments and businesses do, it can change. But all this needs political leadership from the developed world.”