The UK, like most countries, has a territorial tax system that focuses on taxing profits generate from economic activity in the UK. It is not possible to use the UK tax system to prevent companies from avoiding paying tax in other countries. Our corporate tax system is designed to protect the UK’s tax base, not those of other countries.
The key issue is ensuring that developing countries have the assistance required to develop their own rules to protect their tax bases. The UK has set up a specialist Tax Capacity Building Unit in HM Revenue and Customs (HMRC), which deploys HMRC staff to developing countries to provide technical expertise. Earlier this year, we committed to doubling our funding for tax projects in developing countries.
The UK is also at the forefront of global efforts to address tax avoidance by multinational companies through the OECD-G20 Base Erosion and Profit Shifting (BEPS) project. Over 60 countries have been involved in this work, including developing countries.
The BEPS project was completed on 5 October, and the focus is now on implementation. The UK is chairing a group of over 90 countries, including developing countries such as Zambia, who are working together to develop a multilateral instrument (MLI) to update the global network of tax treaties in line with the BEPS project outcomes. The MLI will help developing countries whose tax treaty negotiation expertise may be more limited than in governments of developed economies.