Developing Countries: Impact of Multinational Companies' Financial Practices and UK Tax Policies — Question for Short Debate
6:49 pm

Photo of The Bishop of Derby

The Bishop of Derby (Bishop)

To ask Her Majesty's Government what assessment they have made of the impact of multinational companies' financial practices and the United Kingdom's tax policies on developing countries.

Photo of The Bishop of Derby

The Bishop of Derby (Bishop)

My Lords, I am very glad to have secured this debate on what has come to be known as tax justice. The point is to ask Her Majesty's Government what assessment they are making of the impact of the policies of multinational companies in terms of taxation, the effect that that has on developing countries, and the impact of our own tax policies on developing countries. They are the issues that I am inviting your Lordships to discuss.

I declare an interest. I am a trustee of Christian Aid, which does a lot of work in this area. I put down for this debate a long time ago and suddenly it has become very topical, with Starbucks, Amazon and others bringing it to the fore. That should remind us that we are talking about citizenship-corporate citizenship, in this case. People recognise that as individuals and companies create wealth and income, it is only right that a proportion of that should be invested in the country in which it is created for the well-being of its resources and development.

We know that in our own country the cost of health, education and infrastructure is high and very difficult to maintain so everybody should make a contribution. That is why there is such an outcry about Starbucks and other companies In developing countries, the need for those basic things is much greater. As rich countries are getting richer, poor countries are getting poorer. Therefore, the need for health, education and very basic infrastructure is enormous. It is estimated by Christian Aid and others that developing countries, through not collecting tax revenue that they might be expected to collect, are losing something like £160 billion a year. That is more than the whole flow of international aid into developing countries. The figures can be debated and disputed, but the point is that the scale of the loss of revenue through taxes not being paid in developing countries is massive at a time when there is enormous social need.

We should not be surprised that the Chancellor himself says that tax justice is a moral issue. We should not be surprised that concern comes from these Benches because, in the Christian tradition, Jesus and Paul make it very clear that there is a duty to pay taxes to contribute to what we would call the common good and the common life. Each country needs the resourcing to provide a common good and a common life. What happens is that multinational companies are able to create wealth in developing countries, but then shift the wealth often to secret tax havens and other locations, making very little contribution to the needs and resourcing of the country where the wealth is created.

There are a number of key issues that I want to offer to frame this debate. The first is about corporate citizenship. What is the moral duty on organisations and companies that gain wealth from being in a particular country if they shift it away to other places to minimise their tax payments and the wealth that was created does not contribute to the society that created it? Secondly, surely it is in the interests of multinational companies in developing countries to have more stable structures and a better health and education provision for the workforce, so that the businesses they are trying to run are better resourced. It would seem to be sensible for multinational companies to contribute more to the better infrastructure and resources of developing countries.

Thirdly, it must be in the interests of companies working in developing countries, and of our Government, that these countries are resourced well enough to be stable politically, economically and socially, because poverty creates instability. For companies operating in a country, and for Governments like ours, we want to encourage a resource base that allows stability and security. An increasing number of people in our society think that tax justice is a very high priority as a moral issue. In a recent poll, 58% of people in this country want tax justice to be recognised as a moral issue. The Prime Minister himself has said that as we go into the G8 next year he wants tax justice to be an important issue. People are recognising it as an issue. The question is: what are we going to do about it?

Within Parliament, the International Development Select Committee, which is a cross-party grouping, has recently produced a report about tax resources needing to be paid in developing countries to combat poverty, promote stability and create better conditions for business. The committee makes a number of specific recommendations which highlight what we could be doing and what we could be contributing towards. The first recommendation is that we should support country-by-country accounting for greater corporate transparency. In each country, we should try to gain information about profits, the payment of tax and where money is coming from. The second recommendation is that there should be an improved exchange of tax information. Many developing countries do not currently have the civil service infrastructure to gain this information or even to ask the questions that might help them discover what is going on. As we can develop information from companies that have their headquarters here then we might have information that can help other governments. Many developing countries have multinational companies within them that are subsidiaries of major companies based in this country and in the City of London. We would therefore be in a position, as we gain more information and transparency about the movement of money and where tax is paid, to share it with other governments. Thirdly, besides a new country-by-country accountancy for greater corporate transparency, besides improved exchange of tax information, the committee recommends that in our own tax practices we assess as we make policy the impact they will have on developing countries.

The Government have accepted the recommendations about capacity building in developing countries to handle matters of tax better but they have yet to give a clear steer on their response to the recommendation about the exchange of information that would help developing countries better perceive the wealth that is being created and ask for a proper share of it. I have a major concern that we are developing bilateral conversations with countries such as Switzerland about exchange of tax information. That may be helpful in the short-term on some fronts for us domestically but it is creating agreements from which developing countries are excluded. It therefore makes it more difficult rather than easier for developing countries to know about the wealth that is being created within them and any tax revenues they may be able to claim a share of.

I welcome the fact that in 2013, through the G8, our Government are going to take a lead in this area. I welcome the Government's commitment to reaching the 0.7% aid target. However, I want to offer two perspectives to frame this short debate. The first is the point I made about corporate citizenship. Many subsidiaries of companies that operate and extract wealth and resources from developing countries have a base in the UK. If we develop a sense of transparency here then our corporate citizenship that these companies must be challenged to step up to must include a governmental approach to citizenship that shares that information.

My second strand comes in the form of questions to the Minister. Will the Government consider provision in UK tax policy to assist developing countries to collect the taxes that they might be due? Would a Treasury Minister be willing to meet a delegation of interested people from this House and other agencies so that we can look at the impact of our tax policies on developing countries? What concrete steps will the UK Government take to tackle secrecy and the lack of transparency which allows this huge outflow of wealth and stops countries getting the deserts that they might claim? Finally, what steps will the Government take to consult global civil society, including the churches, to gather intelligence, recognise needs and see how they can be put together?

I look forward to contributions to the debate.

7:00 pm
Photo of Lord Brooke of Sutton Mandeville

Lord Brooke of Sutton Mandeville (Conservative)

My Lords, the whole of your Lordships' House is in debt to the right reverend Prelate the Bishop of Derby for securing and launching this debate. If I follow him in telegraphic mode it is because four minutes is a tiny span given the complexity of the debate's subject. I also welcome my noble friend the Minister to these matters, which respond well to his past experience.

The coalition Government have fundamentally changed the basis of UK tax in this area. Previously we used at least to seek to tax UK-based companies on their world-wide profits, if sometimes with variable success. Now we have moved to a territorial tax system so that only profits arising in the UK are HMRC's target. The logic of this is not the subject of this debate but it is a salient background point. If profits arising in Africa, Latin America or elsewhere are no longer in our purview and we make no claim on them, it will cost us little to help such countries to collect the taxes owed to them and we potentially make our own aid giving more effective in the process. In this regard, justice marches hand in hand with national and international interest.

The right reverend Prelate alluded to building a tax capacity in the third world, and both DfID and HMRC do valuable work in this area. I hope we can extend this to enlarge DfID's own tax capability. This would promote DfID reinforcing the Prime Minister's clear intention that tax should be at the centre of his agenda for the G8 next year. In the mean time, I hope that the Minister in his wind up will give examples of current tax help that we are bestowing on developing countries.

For this intention to work, we need to ensure that we go beyond finding solutions that work for ourselves and more widely for the G8 and find solutions that work for all countries. If due and proper revenues are effectively raised by developing countries, then present desperate poverty can, in part, be assuaged to the mutual benefit of all. The G8 conference can be an opportunity for the rest of the G8 and ourselves to make a pellucid commitment to developing countries that we shall put our own houses in order to prevent our structures being used to evade tax in developing countries, and that the G8 will use its power and influence to persuade others to change as well. It is a good and honourable cause and we should be grateful to the right reverend Prelate for having raised it.

7:02 pm
Photo of Lord Browne of Ladyton

Lord Browne of Ladyton (Labour)

My Lords, I am delighted to follow the noble Lord, Lord Brooke of Sutton Mandeville, whom I have admired for almost two decades. I am impressed by his ability to use only two of the four minutes that he was allocated and yet to have made such piercing points. I join him and others in the debate in congratulating the right reverend Prelate on securing the debate, identifying exactly the right theme in his introduction and short contribution and on asking some very pertinent questions. The timeliness of this debate is set by the discussion which is taking place loudly outside about corporate citizenship in this country and the avoidance of taxation by a number of well identified companies. Disturbingly, it would appear to be a growing list as this debate ensues.

The debate is timely also because our Government have a conjunction of opportunities in 2013 to address these and related issues. In 2013 we take the chairmanship of the G8; we are the co-chair of the Open Government Partnership; and we are, as we have debated previously, the chair of the high-level panel on post-millennium development goals. So the conjunction of these, plus G20 opportunities, creates an opportunity for multinational action that has not previously been there.

We are encouraged by the Prime Minister's approach to this. In the Wall Street Journal on 1 November, David Cameron published an article in which he identified combating corruption-which is the overarching issue here-as part of the golden thread of conditions that enable open economies and open societies to thrive. He has in the past repeatedly emphasised the role of transparency, while he aims to lead a Government that is the most transparent and open in the world. So we have a Prime Minister and a Government who ought to be focused on these issues.

I agree entirely with all the points that the right reverend Prelate has made and have been made before, and I am sure that I will agree with many of the points that are focused on tax transparency and accountability. In the next two minutes, I will give an expansive interpretation of the Motion before us to draw the House's attention to opportunities that lie in improving corporate social responsibility by multinational companies in the areas both of the extractive industries and in relation to corruption to expand upon these challenges.

Some 3.5 billion people live in countries rich in minerals. Very few of them are enriched by the extraction of those minerals from their countries. In the All-Party Parliamentary Group on Anti-Corruption only last week, we were treated to an explanation of what has happened to the mineral wealth of the DRC. It has been traded for a fraction of its value to companies in our overseas territories, the beneficial ownership of which appears to be not very far away from senior politicians in those countries. There is a need for transparency in this direction and I congratulate the Government and the European Union on engaging in this and trying to bring our laws up to speed with the United States' laws on transparency of payments to governments. I ask them to ensure that the return that we get for that investment is a proper directive which is influential all across Europe.

Again on transparency and enforcement, the Bribery Act 2010 offers an opportunity to try to interdict this sort of behaviour. If we are to do that, first, we need it to be applied to all legal persons incorporated in all of our overseas territories and crown independencies; I have already identified some of the reasons for that. The OEDC has asked us to do that; perhaps the Minister is able to indicate when we are able to do it. Secondly, we need adequate resources to enforce the Act. Thirdly, the Ministry of Justice guidance needs to be more focused on these issues. Fourthly, we need to appoint some champion in government for anti-corruption. All these things are necessary.

I want in one sentence to make one other point. None of this behaviour in the United Kingdom would be possible if it were not for the behaviour of people called "enablers". Embarrassingly, as a lawyer in the United Kingdom, most of these people are professionals. They are lawyers, accountants, bankers and finance people. Our regulators in this area must be made accountable. When was the last time that a member of one of these professions was struck off for behaving in this way?

7:07 pm
Photo of Lord Shipley

Lord Shipley (Liberal Democrat)

My Lords, I, too, thank the right reverend Prelate the Bishop of Derby for initiating a very timely debate. The current debate on the payment or non-payment of corporation tax in the UK shows that it is a tax that does not work well for the UK, so it is unsurprising that it is not working well for developing countries either. We know that developing countries lose significantly more from lost tax revenue than they receive in international development aid.

In a debate on 22 October in your Lordships' House on the Economic Affairs Committee's report on the economic impact of development aid, I raised the claim of ActionAid that British multinationals were directing profits into tax havens from developing countries to the value of around £4 billion-or one-third of the UK's total planned development aid budget. The Government have subsequently challenged that number. While there may be disagreement on a precise figure, there is common acceptance that the money leaving developing countries owing to tax evasion and avoidance far exceeds the amounts received in aid. In fact, the OECD has estimated that it may be up to three times higher. Christian Aid has estimated that developing countries as a whole lose some $160 billion a year in lost revenues from multinational companies.

We have a clear responsibility to help developing countries. It is not just a question of increasing our spending to 0.7% of our national income. The UN, the IMF, the World Bank and OECD all emphasise that developed countries have a responsibility to undertake spill-over analysis where changes in domestic policy may impact on developing countries. We should welcome the fact that DfID is investing in helping developing countries collect more tax revenues. I have been wondering which Whitehall department is responsible for this matter. Should DfID or the Treasury address where tax is taken? I would be very grateful for the Government's view on where the responsibility lies between DfID and the Treasury.

I know that the Government are active internationally in promoting tax transparency and the exchange of information between jurisdictions, but I wonder if they are doing all they could in this area. For example, recent reforms to UK-controlled foreign companies rules mean that we need to assess urgently how we can better support developing countries' tax systems. It would be helpful if the Minister could confirm what action is planned by the Government to address this.

If we want to help ourselves and developing countries alike, we should now be demanding real reform of corporation tax so that profits are paid where they are really earned, including mines and wells in the case of many developing countries. If we could find a way to allocate the profits of international companies on this basis, the money could be so much better invested.

The recent outrage in the UK will, I hope, prompt decisive action, but this action cannot be simply for rich countries. We need reform that works for all countries. If we want our aid to be effective, we cannot undermine it by allowing tax revenues to be transferred out of developing countries.

7:11 pm
Photo of The Bishop of Hereford

The Bishop of Hereford (Bishop)

My Lords, I, too, begin by congratulating my friend and colleague the right reverend Prelate the Bishop of Derby on securing this debate at such a timely moment.

The 19th report of the House of Commons Public Accounts Committee, published only a few days ago, began:

"Transparent, predictable and fair taxation is at the core of our public finances. The Government has a responsibility to assess and collect tax due from all taxpayers, without fear or favour, and taxpayers should pay all that tax which is due".

It continued:

"The hearings we held showed that international companies are able to exploit national and international tax structures to minimise corporation tax on the economic activity they conduct in the UK. The outcome is that they do not pay their fair share".

This is all familiar to us, but if that is true for the United Kingdom, it is even more so for developing countries.

The key issue with regard to collecting any tax-unless it is from the extraction companies, to which reference has already been made, where it may be the outcomes that we need to be looking at-is finding the profits on which it is due. You can have the best tax law in the world, but if you cannot find the profits, it is all a waste of time. That means that the first and most important job for developing countries is to identify profits that should be declared in their countries but are not.

There are three ways in which we can do this. We can call for the introduction of country-by-country reporting that requires a multinational corporation to publish a profit and loss account for each and every country in which it trades. We can also voluntarily supply to developing countries information, obtained here in the United Kingdom, on the tax affairs of multinational corporations based in this country, where that information suggests that developing countries have tax issues that they might want to raise with those companies.

Changing our disclosure of tax avoidance schemes rules to include developing countries, not just the UK, as well as potentially high-risk transactions, could greatly assist. It would enable the UK to provide valuable, targeted information to developing countries to help them to both enforce their existing laws and identify and improve their legislation, just as DOTAS has here in the UK.

Lastly, we can ensure that if in future we collect information from tax havens-as it seems that we are likely to do with the Isle of Man and, I hope, others-on who beneficially owns companies in places such as the Crown dependencies that would be of benefit to developing countries, we should send that on as well, although this should be only a stepping stone to ensuring that all countries have access to information, not just the United Kingdom and other richer countries. The United Kingdom should work proactively to ensure that jurisdictions offer developing countries the same access that they grant to the United Kingdom itself. All of this needs not only action here but, ideally, international agreement to act in this way, especially from the G8. The relationship between multinationals and developing countries is skewed by the wealth, influence and power of the former, which makes it extremely difficult for the developing countries themselves to challenge legally or financially. We need to act to redress this balance, and improving the information is a vital step in that direction.

7:16 pm
Photo of Lord Haskel

Lord Haskel (Labour)

My Lords, I also congratulate the right reverend Prelate the Bishop of Derby on this debate. He really has caught the spirit of the times; the spirit that, nowadays, business plans have to stand up to scrutiny socially and ethically as well as commercially and financially. Be good corporate citizens, as he put it. Not only is it reasonable to pay tax where people work, where the infrastructure and facilities are provided and the business is done; but also, avoiding the tax puts the local firms who pay their fair share of tax at a disadvantage.

It is fair to ask, "What is it to do with us?" All this happens an awfully long way away, over the water somewhere. However, it does concern us because London is the place where a lot of these tax-avoidance schemes are thought out and prepared. The right reverend Prelate the Bishop of Hereford just reminded us that there is often no relationship between the consolidated accounts and the tax accounts prepared by firms here in London. Committees in both your Lordships' House and another place have drawn this to our attention, and so did my noble friend Lord Browne. In addition, some firms that use these procedures are controlled here in London. Your Lordships' Select Committee has also told us that many of these tax schemes are prepared and sold by the big four accountancy firms based in London-the very firms employed by the Government as consultants. Will this form part of the Chancellor's consultation about honest tax payment being a condition of getting a government contract? For overseas companies, London is quite often a tax haven, alongside the better known ones in Alpine meadows or on islands tropical or not so tropical.

Incidentally, many of these islands are controlled by the UK. Why can we not close down these activities, which deny the Chancellor legitimate tax? Today we are getting the draft Finance Bill. I am sure that the Minister is familiar with its hundreds of pages. Can he tell us, therefore, whether the promised general anti-avoidance rule will draw a line under this activity? Will the Finance Bill have an effect, or are more up-to-date international rules needed to put a stop to this, such as the unitary tax system described by the noble Lord, Lord Brooke?

It would be a big step to get the G8 to agree to this. Meanwhile, as the right reverend Prelate said, we have to rely on morals and society; on good corporate citizenship. However, there are glad tidings. The good news is that the right reverend Prelate has an important ally, perhaps even better placed than the Prime Minister, who has referred to these activities as immoral. I speak of the Mayor of the City of London. What caught my attention when Roger Gifford became the 685th Lord Mayor of the City of London was that he went to my old school-no, Minister, it was not Eton. So I was interested to hear that he has chosen "the City in society" as the theme for his year in office. I quote him:

"Unbridled capitalism is something none of us believe in but it's how to bridle it and yet leave room for growth, entrepreneurship and job creation",

was how he described his task, and that is what he set out to do. I found that pretty inspiring and brave so, when he was interviewed on the "Today" programme on the day of the Lord Mayor's show, I listened with interest. He spoke about how his efforts are to be directed towards the City reaching a newer and healthier capitalism. Truly, I wish him every success, and may part of that success be shared with the right reverend Prelate, working on his important campaign. As I have tried to point out, the Government can do a lot to help, and I hope that they will.

7:20 pm
Photo of Lord McKenzie of Luton

Lord McKenzie of Luton (Labour)

My Lords, like others, I congratulate the right reverend Prelate the Bishop of Derby on introducing this debate and I welcome the manner in which he did so.

I was not going to speak in this debate but I was prompted to do so because I was recalling a largely happy time in the mid to late 1990s when for a couple of years I had responsibility for leading a practice of a major accounting firm in Vietnam. We had offices in Ho Chi Min and Hanoi, and we lived in Ho Chi Min. My observations today are not meant in any way to be a criticism of those incredibly resourceful people but are an anecdotal recollection of the tax challenges of a country at an early stage of the opening of its economy to international investment.

In common with a number of countries at that stage in their development, it had no embedded concept of international accounting standards and, at best, a rudimentary set of tax rules applicable to foreign investors. Not surprisingly, there was no broad understanding of the international tax environment, or indeed of international auditing standards, and the issue of corruption, to which my noble friend and others have referred, was a challenge. In these circumstances, the need for capacity-building was paramount and continual. We certainly saw it as part of our obligation to engage in training sessions for the Ministry of Finance, but there should be a continuing government programme of secondment into the local revenue authorities and transfers and secondments out to more sophisticated regimes.

Experience on some major auditing assignments, which were funded by money from the World Bank or, in another case, the Asian Development Bank, would have been easier had the requirements to have training been more tightly prescribed. Having to have uncomfortable negotiations with a few people who wanted an international study tour, rather than several hundred of their middle-ranking people having good-quality training, was a disappointment at best.

In Vietnam, foreign investors had to be licensed. You could do business either by way of a wholly foreign-owned enterprise or a joint venture with a local partner, depending on the sector and technology transfers. Some sought an in-country presence by way of a representative office, which should have precluded them doing business there although often, sadly, it did not. The concept of aiding transparency by having separate local accounts is to be supported, although there are issues where the business is a joint venture and a local partner, possibly an arm of government, that may be less welcoming of the concept. Having a requirement to identify related party transactions in accounts is also to be strongly supported, but it is not a panacea.

Transfer pricing, or the inflated pricing of goods or services from connected companies, is a challenge the world over, and the opportunities for companies to unbundle their products, sometimes stripping out a royalty flow, is a challenge as well. The IMF points out that developing countries signing up to sophisticated OECD-type tax treaties that generally seek to lessen the tax costs on interest, royalty and dividend flows may not be in those countries' best interests when there is a large imbalance of such flows between two territories.

Vietnam, like a number of other developing economies, has gone down the path of adopting a VAT system. It was in the process of doing this at the end of the 1990s. As a source of tax, of course, it is not reliant upon the computation of profit and the vagaries of that process. A VAT system can be supportive of exports, although it may not always be progressive. Notwithstanding that, developing countries need a profit or corporation tax also, but one which is based on clear rules and where the fuzziness of the law does not lead to tax liabilities being negotiated. The risks are obvious even for a Starbucks. Also, taxation of individuals should not be overlooked. There can be a huge differential between local wages and expat salaries. The latter are often bolstered by accommodation and tax protection packages. For some, the temptation to split contracts and park some remuneration offshore may be too great. Requiring more vigorous reporting on such arrangements opens the way for local officials to challenge this.

These are a few anecdotal comments from the coal face of a developing economy and the challenges that it faced.

7:25 pm
Photo of Baroness Royall of Blaisdon

Baroness Royall of Blaisdon (Labour)

My Lords, I, too, offer my congratulations to the right reverend Prelate the Bishop of Derby on the superb timing of this important debate and on his excellent introduction, with which I agreed.

In recent weeks, high-profile cases of multinationals avoiding taxes have attracted real anger, both from the public and politicians. When families and businesses are squeezed and living standards are falling, it is right that we expect everyone to pay their fair share. Corporate citizenship is a good concept. While we should not taint all businesses with the same brush-most of our businesses make a significant contribution to the UK economy-this phenomenon is not restricted to a few multinationals. According to ActionAid, of the 100 biggest FTSE companies, 98 use tax havens. This suggests that tax avoidance is a systematic feature of the way in which many large companies operate, rather than an occasional one-off.

Tax avoidance has a devastating effect on developing countries. As noble Lords have said, the OECD estimates that developing countries lose three times more to tax havens than they receive in aid. This has the effect of depriving developing countries of a much-needed, sustainable source of revenue, taking money away from essential services, restricting growth and preventing Governments investing in crucial infrastructure. Tax avoidance must be at the centre of future aid policy. Indeed, in its report published in August, the International Development Select Committee stated:

"Tax is an issue of fundamental importance for development. If developing countries are to escape from aid dependency, and from poverty more broadly, it is imperative that their revenue authorities are able to collect taxes effectively".

An expanded tax-revenue base is one of the only ways for developing country Governments to develop a sustainable source of revenue to deliver social programmes and target poverty and inequality. Of course, as has been said, poverty and instability go hand in hand too often.

The successor to MDGs, and to the future of development must be values-led, with the goal of tackling inequality at its heart, and this must include tax avoidance. Labour in Government made progress on this issue but not enough. For example, in 2002 we launched the extractives industries transparency initiative, which has been mentioned and which promotes revenue transparency at a local level, but much more needs to be done. We pledged in our 2010 manifesto to take further action and we are now launching an anticorruption review with the Mo Ibrahim Foundation to build a strategy that will aim to deliver a strong, global anticorruption coalition.

The Finance Bill 2012 introduced a relaxation of the Government's anti tax haven laws; the so-called controlled foreign companies rules. Under the current rules, if a UK company reports profits in countries with lower corporate tax rates than the UK, the UK Government can impose an extra tax charge on the company to make up the difference. Under the revised rules, however, the UK will only be able to impose this extra charge if the profits have been moved out of the UK. Profits moved out of a developing country and into tax havens will no longer incur the charge, providing a greater incentive for companies to shift profits into tax havens. This move was strongly criticised by a number of NGOs, as allowing multinationals to avoid paying taxes in developing countries.

In its recent report, Tax in DevelopingCountries: IncreasingResources forDevelopment, the International Development Select Committee stated that the revised rules,

"will incentivise multinational corporations to shift profits into tax havens. This is likely to have a significant detrimental impact on the tax revenues of developing countries".

The committee recommended that,

"the Government should conduct ... an analysis of the likely financial impact",

of the CFC rules on developing countries and, depending on the outcome, should consider dropping its proposals. However, the Government rejected this recommendation on the grounds that the measures were intended to benefit the UK economy and that such an assessment would not be feasible.

During the passage of the Finance Bill, Labour urged the Government to reconsider changes to the CFC rules and tabled an amendment but the Government pushed ahead-despite advice to the contrary from NGOs, the IMF, the OECD and the World Bank. Will the Government urgently review the CFC rules? Could the Minister also tell the House what the Government are doing now, following the lost opportunity of the Finance Bill, to promote responsible capitalism?

Tax avoidance is a moral and an economic issue. With the G8 and the discussion about the new MDGs, there is an excellent opportunity to bring this issue to the fore and find a global solution. I would strongly urge the Government to take heed of the wise advice given this evening and stand up for social justice and responsible capitalism, at home and abroad.

7:31 pm
Photo of Lord Marland

Lord Marland (Conservative)

My Lords, I, too, extend my thanks to the right reverend Prelate for initiating this debate. As all noble Lords have said, the debate is at a very timely moment where this is very much in public debate. It is important that this whole debate started from the moral standpoint, because that is the key to where we can go. With moral leadership, we can make great progress.

I would just take issue on a couple of points that the right reverend Prelate and the noble Lord, Lord Shipley, raised. We do not recognise the figure of $160 billion; in fact, we are thinking that if it was a man called James Henry who produced that figure, perhaps he should come and help us out in the Treasury. The right reverend Prelate also made the point that some rich and some poor countries are getting poorer, but in fact a lot of poor countries are getting richer. I have seen that first-hand in Mozambique and in Angola-and in Vietnam, which has been getting much richer even if it is getting a bit poorer at the moment. It is not just the picture as he painted it.

We must not forget that multinational companies are nation builders. I look at places such as the Middle East, where great British oil companies have established themselves and helped to create a country-as they have in Nigeria-and helped to create the wealth of that country in an incredibly responsible way. I do not particularly want to be quoted on the statistics, but look at the work of Shell in Nigeria and how few people it employs there from the UK in that entire company, and how it has developed skills in the country. This must not just be a debate where we attack the multinational companies, a great many of which act morally and properly and contribute greatly to the future of a country. Yet I completely recognise, as do this Government, that tax justice is an important issue.

A number of noble Lords raised the IDC report, which was extremely measured and well thought-out. The right reverend Prelate asked about country-by-country transparency and the Global Forum on Transparency and Exchange is one of the vehicles that can be used for that. The improved exchange of tax information across countries would obviously help and will be key to the co-operation required in tackling this substantial issue, which quite rightly takes favour with noble Lords. I shall pick up on a number of his points later. However, on the subject of a Treasury Minister meeting with Members of your Lordships' House, I am not a Treasury Minister myself so I am delighted to volunteer a Treasury Minister to do that immediately, and I think that it should happen many more times than once. The right reverend Prelate's final point about global civil society gathering together information is key. It is about corporate citizenship. I am delighted to hear the church speak in that area.

As has already been referenced, my noble friend Lord Brooke of Sutton Mandeville said in two minutes what most of us would take two hours to say. He asked what support DfID has given. DfID has given £20 million a year to support tax regimes throughout the world. The total is about £100 million over a five-year period. For example, it is £11 million in Sierra Leone, £8 million in Tanzania and £8 million in Rwanda. In Rwanda, because of that intervention tax take has gone up by six times, which is a significant issue. Some £21 million has gone into Afghanistan. In 2004 the tax take there was 4% and now it has gone up to 11%. It is working, it is direct action. The report by the IDC said that DfID does not have the capability within its department to understand the tax issues that are going on-many of us do not have the capability for understanding them-but with the support of the Revenue DfID has acknowledged that and is building up its capacity.

The noble Lord, Lord Browne of Ladyton, talks about the G8 and the leadership through that, and he talks about a champion. I think that there is no greater champion than our own Prime Minister, who is championing this cause and profiling it highly, and has made it a major point as the G8 chair. I am grateful that he mentioned the Bribery Act. It is one of the great selling tools for British businesses in the work that I do abroad as the Prime Minister's trade envoy. British companies are transparent and have to be by law. This is admired by countries across the world as they seek to become transparent. In January I will go to Libya, where transparency is the main focus of everything that they do now. With that law we have shown great international leadership. I give credit to the previous Governments, which I do quite often, for bringing in that law. It has been a bedrock for the way forward for British companies.

The noble Lord, Lord Shipley, knows as much as anyone about this. He was at Procter & Gamble and part of an international business. The right reverend Prelate the Bishop of Hereford echoes many of the words that are spoken by his right reverend colleague. I am delighted to see that they are in unison in showing this moral leadership.

The noble Lord, Lord Haskel, identifies a number of points. He was educated not at Eton but at a northern fee-paying school, Sedbergh, which I thought gave a decent education. Certainly my school did. I was at Shrewsbury. Like most of the country, we did not go to Eton but we could add up. A lot of my schoolmates and no doubt his went into the big four companies. In the days when we were growing up, they were where the money was to be made if you became an accountant. It is important that accountants act within the law, and I am sure that the big four do. There are penalties if they do not. They provide an incredibly important global service and are in an unrivalled position to have a perspective on that and advise government.

I am grateful to the noble Lord, Lord McKenzie of Luton, for his anecdotal comments about Vietnam. These points bring everything into focus and to hear them at first hand is always interesting. What a great pleasure it is to sit opposite the noble Baroness, Lady Royall. Along with the couple of points that she made, we all look with interest to the anti-corruption review that her party is carrying out. I shall make a small political point, as she did, which is that a lot of this stuff went on under the previous Government and that, "We're all in this together"-this is a nice opportunity to say that. Indeed, this debate shows that. It is a massive global issue.

From the UK's point of view, we have a lot of things in place. We have the disclosure of tax avoidance schemes and the anti-abuse rules, in relation to which Mr Aaronson QC has come up with a lot of advice. We have taken a very proactive stance against Switzerland, and not before time, as many would say. We announced in the Autumn Statement that we are going very hard for British citizens who have deliberately avoided paying tax in this country. Indeed, our country is leading the way on how the tax take should be made. It is through leadership that Britain has always been so strong. From the global point of view, we announced on 4 November that we are going to co-operate with the Germans, the French and all other G20 members. We are contributing financially to support this global endeavour. The controlled foreign companies reform prevents companies unreasonably moving into lower tax regimes, which should help in this country. As I said earlier, we have the global forum on transparency and exchange of information for tax purposes, and we are very much part of the G8 financial action task force. As chair of that, we will be showing significant leadership.

I want to go back to the fundamental point that the Government are showing leadership. I congratulate my right honourable friends the Prime Minister and the Chancellor for taking up this issue. I am sure we would all do it. This is not a political point because everyone is behind this issue, and I thank noble Lords for their kind remarks about what we are doing. The Government are showing leadership, as they must, but I do not believe it is for the Government to talk about morals. It is for the church and Christian bodies to talk about morals, and I am therefore delighted that this debate was initiated by the bastion of moral guidance in my religion. I congratulate the right reverend Prelate on taking such a lead on this issue and on an excellent and purposeful debate.