G8 Summit

Baroness Falkner of Margravine Excerpts

Thursday 13th June 2013 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, I, too, thank the noble Lord, Lord Trimble, for securing this extremely timely debate ahead of next week’s G8 meeting in Northern Ireland. I am going to concentrate on just two of the three Ts that the Prime Minister identified as his priorities for the meeting: tax and transparency. On tax, it has long been argued that bilateral arrangements between countries were never going to deliver. Multinationals simply move to a different jurisdiction, cloak their activities in opacity and pay their teams of lawyers and accountants to devise ever more ingenious methods legally to avoid tax—legally in law at least, if not in spirit.

It is with great enthusiasm that I see the United Kingdom rising to the challenge of tackling tax and transparency in this forum. While these eight countries may not represent the collective might of the world’s main economic centres today—I must say that the presence of Italy seems a little anachronistic—the G8 is a good place to start. Any progress here will surely lay the foundations for a wider debate among the G20 countries, to be hosted by Russia.

The subject of the tax and transparency of large corporations generates public opprobrium like no other. A poll in Prospect magazine recently found that the public hugely disapproved of large corporate tax avoidance—some 88%—while their disapproval of wealthy individuals who cheated to avoid tax was significantly lower at something like 38%. Not paying VAT to the plumber or to the person who came to do the odd job, but paying cash, resulted in only about 6% or 7% of people disagreeing. That may not be entirely rational, but the lesson that I would draw if I were a large multinational is that the large corporations are in the firing line, not small individuals, as the public see them.

It is a hugely ambitious agenda for the Government to take on, and the challenge of breaking down corporate secrecy by seeking to require companies to disclose their beneficial ownership, which is asking who owns and controls them, is to be applauded. By setting up centralised registers with a clear line of sight, which is the minimum available to the law enforcement agencies—I would like public access as well, but I recognise that that may be too much to ask for at this point—the poorest Governments who have the greatest need will at least have the tool with which to begin to look for their stolen assets.

This would not be comfortable for the rich developed countries, nor for their associated tax havens. In the former category, we have the United States where much responsibility for corporate oversight is at state level so the Government may be less willing to act against the state of Delaware, for example, which according to the Economist has more companies numerically than its population. Small countries are the best known tax havens and unfortunately many are UK Crown dependencies or overseas territories. In this regard, the Commonwealth—I am aware that the noble Lord, Lord Howell of Guildford, will speak right after me, so I shall be careful what I say and mute my criticism as I know well to do when he is speaking—has been rather feeble at taking action as a forum that might have been well suited to this task. Among its members are some of the poorest countries of the world, where assets have been plundered and corruption is rife. The ability of these countries is heavily circumscribed by the lack of capacity—having sharp civil servants and revenue officials, schooled in the latest techniques of outright corruption and capable of spotting corporate tax evasion.

At the other extreme, among its members are the offshore banking centres—the relatively rich Caribbean islands where many of these companies are registered. We have only today heard the news that Bermuda, among the richest islands and a strong financial services centre, has announced that it will not sign up to the multilateral convention on mutual tax assistance. This is particularly frustrating as all three Crown dependencies—Jersey, Guernsey and the Isle of Man—have come on board along with the Cayman Islands. Perhaps the Commonwealth could embed a programme of secondment of experts from the rich developed world. Perhaps even the architects of these opaque tax structures might go and work with those poor countries’ tax authorities to try to build up capacity to retrieve those billions owed. It may be a sobering experience for the practitioners in the City of London to see for themselves what the effects of their work reaps in the lives of the millions who are deprived of the benefits of their natural resources, for example.

Turning to extractive industries, US entry along with France and Germany to the extractive industry transparency directive is extremely positive. We cannot continue with a system where secret deals are struck by companies and Governments whereby huge amounts of profits disappear into the ether. It is evident that when we require companies to say what they have paid and Governments to disclose what they have received, it is harder to steal. The United Kingdom is right to press this case more vigorously despite the fight back in the US from the big oil companies. We have also seen the public dismay caused by corporate tax avoidance with the likes of companies such as Google and Starbucks. People often say that when a company provides essential services it is difficult to vote with your feet, as people have been able to do with Starbucks—sufficiently so as to make it volunteer to pay £20 million in tax. But volunteering is surely not good enough. People say that we cannot take similar action against Google because using a search engine is no longer an optional extra in our lives. However, we know that its profits are made from selling advertising and it should not be beyond the wit of the British public to reject the products of those Google advertisers until the company sees that it might need to come into line as its profits go south.

More importantly, those companies argue that it is for the United Kingdom legislatures and the Executive to come up with laws that prevent them from their propensity to avoid. To some extent, I have sympathy with that argument. When we get report after report from the Public Accounts Committee, as we have this morning, it is not entirely clear to me why the Executive—our Government, HMRC and the Treasury—cannot come back to Parliament with some proposals at least to attempt to get to grips with the problem of new and more innovative structures being developed by the financial services sector on a regular basis.

I will use my last minute or so to talk about Syria, which is also on the agenda. For those, like me, who believe that the civil war in Syria will be brought to an end only when the parties are prepared to come to the negotiating table, it is axiomatic that that will inevitably be brought about by success or failure on the battlefield. For the western world to stand aside from supplying arms when all around them are doing so—and to the most unfriendly groups in terms of our interests—it seems that as a country we have become entirely isolationist. That is something completely out of character with our history, our international standing and our permanent membership of the United Nations Security Council.

Moreover, we may eventually be forced to do so under our obligations in humanitarian law. So I say with some regret that I wish we would not go down the route on which we believe we have to ask Parliament to approve every step in our moves to deal with the Syrian imbroglio. I do not understand why an Executive—a Government—are appointed if they feel they are so weak in tackling what is clearly in our interests: ethically, morally and in humanitarian terms.