Oral Answers to Questions

Diane Abbott Excerpts

Wednesday 16th March 2016 Commons Chamber

[Justine Greening]

As the hon. Gentleman will be aware, HMRC leads on these negotiations, but they are progressing well and the House may be interested to know that the Government of Malawi issued a press statement on how they feel the negotiation is going. They talked about

“fruitful discussions to review and modernize the existing agreement”

and said that in their view:

“These discussions are progressing very well”.

I can assure the hon. Gentleman that we will continue to work alongside the Treasury to ensure that tax systems in the countries in which DFID works are developed so that in time they can self-fund their own development, releasing the UK from doing that.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

But the UK’s current tax treaty with Malawi severely restricts the ability of the Government of Malawi to tax British firms operating there. Is this not a case of DFID giving with one hand while UK tax policies take away with the other?

[Justine Greening]

I do not agree at all and, perhaps most importantly, neither do the Government of Malawi, who said:

“Whilst the current agreement is admittedly aged, there is no evidence that the agreement has motivated some British investors to deprive the Malawi Government of its revenues. On the contrary, both the Malawi Government and the British Government, as well as the nationals of the two countries, have evidently acted in good faith to ensure that neither party is exploited on the basis of the current agreement.”

[Ms Abbott]

But does the Secretary of State agree that the era of outdated and unscrutinised tax treaties that create opportunities for multinational tax avoidance must come to an end?

[Justine Greening]

It is time that the international tax system worked more effectively so that countries such as Malawi can mobilise their own domestic resources, including tax. The hon. Lady will know that this particular treaty was last updated in 1978. The Government have taken the initiative to work with the Malawi Government to update this relatively old treaty and, as I have set out, those negotiations are going well. Of course, it sits alongside the rest of the work the Government have done on beneficial ownership and improving transparency in tax so that developing countries can get their fair share.