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Government to open new tax loophole

Mar 6

Written by:
06/03/2012 14:15  RssIcon

Could cost £5 billion in tax revenue

Research from ActionAid suggests that a new corporate tax loophole will cost poor countries £4 billion and the UK £1 billion a year.

Ahead of the most important austerity budget in a generation, the government plans to open up a huge new tax loophole that will cost ordinary people around the world billions, warns ActionAid in a new report called ‘Collateral Damage’.

The international development charity has revealed that this loophole will allow UK-based multinationals to avoid an estimated £4 billion worth of taxes in developing countries and the UK government has themselves admitted it will also cost the UK Treasury £1 billion.

Until now, the UK’s anti-tax haven rules have provided a deterrent to companies seeking to avoid paying taxes in Britain and poor countries alike. The proposed changes will make it easier and more lucrative for UK companies to dodge tax in developing countries.

Martin Hearson, of ActionAid said: “If the government waters down these rules in the March budget it could inflict huge collateral damage on poor countries like Zambia, Ghana and Tanzania who desperately need that money to fund doctors, nurses and teachers and to ultimately help lift them out of poverty. And with a cost to the UK of £1billlion - everyone loses out.”

A recent UK opinion poll commissioned from YouGov by ActionAid also showed strong demand for tougher government action on corporate tax avoidance with 79% saying the government isn’t doing enough to tackle tax avoidance.

The results revealed widespread support across the political spectrum and in all regions.

74% of Conservative voters, 83% of Labour voters and 87% of Liberal Democrat voters said the government should be doing more tackle tax avoidance.

72% said that companies that use legal loopholes to avoid their tax bills in the UK or developing countries were behaving irresponsibly.

Martin Hearson continued: “The British public wants the government to do much more to prevent endemic corporate tax avoidance.  Why should ordinary people around the world continue to pay the price of tax dodging by UK companies? This new loophole could cost the poorest countries as much as £4 billion a year. It’s time for the government to urgently rethink its plans.”

ActionAid is calling on the Government to make a full assessment of the changes’ impact on developing countries, and to take steps to mitigate any harm, before they become law. In November last year, the IMF, OECD, UN and World Bank called on G-20 countries to undertake such “spillover analyses” when they make big changes to their tax laws.

 

Find out more about Ethical Consumer's Tax Justice Campaign here.

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