A lot of people have contacted me over recent weeks with concerns about the rules that apply to tax payments from British companies abroad. Many of you are concerned that the proposed changes to the rules may make it easier for these companies to avoid paying the tax they owe. You can see my response to this here:
Thank you for your recent email regarding Controlled Foreign Companies.
You express your support for the cross-party consensus on giving 0.7% of our Gross National Income as aid by 2014. However you state your concern regarding the contents of the draft Finance Bill 2012, which you suggest could make it easier for UK companies to use tax havens in order to avoid meeting their financial obligations in developing countries. You ask me to raise your concerns with HM Treasury.
I share your worry that large UK companies could avoid paying tax in developing countries. For this reason, I have written to the Rt Hon George Osborne MP, Chancellor of the Exchequer, raising your concern with him. In my letter I emphasized the importance of ensuring that UK companies do not undermine the UK’s approach on development issues. I will inform you when I receive a response.
Thank you for taking the time to write to me.
Here is the reply that I received from David Gauke MP, a Minister in the Treasury:
I found the Minister’s response quite disappointing as he failed to convince me that the Government have thought through the impact of their proposals thoroughly enough. I set this out in a further letter to my constituents that you can see below:
I have recently received a letter dated 7 March 2012 from David Gauke MP, Exchequer Secretary to the Treasury, regarding Controlled Foreign Companies (CFC) rules. Please find a copy attached. This was sent in response to my letter of 28 February which I sent following your initial enquiry.
In my letter I expressed your concerns that the Finance Bill may introduce rule changes which allow UK companies to avoid paying tax in developing countries. I welcomed the cross-party agreement on international aid and development matters, noting that it is therefore important that UK companies do not undermine the UK’s approach on development issues. I urged the Government to rethink the proposed rule changes before the Budget, ensuring that the impact of any future changes be thoroughly assessed before they are introduced.
Mr Gauke states that the Government does not believe that any assessment of the impact of the CFC rule changes, including the one advocated by Action Aid, would be sufficiently robust or accurate to be of value. Due to this he notes that no official assessment has been made. The Minister acknowledges the importance of allowing developing countries access to sustainable sources of revenue, including taxation. He states the UK Government’s commitment to aiding this process through capacity building, improving exchange of tax information and increasing transparency in the order to crack down on corruption. He notes that the Government was successful in obtaining a commitment from the G20 on multilateral tax information exchange at the Cannes summit last year.
I acknowledge that this response is disappointing; however I fear that further correspondence with the minister will be unlikely to change the Government’s mind on this issue. If you wish to discuss this issue further with me I would be happy to meet with you at one of my regular surgeries. Please call my constituency office on 0131 661 7522 if you wish to make an appointment. Otherwise thank you for taking the time to write to me.
Of course if you would like to comment further on this issue, you can contact me by email on email@example.com.