Developing Countries: Impact of Multinational Companies’ Financial Practices and UK Tax Policies

Lord Brooke of Sutton Mandeville Excerpts

Tuesday 11th December 2012 Lords Chamber

[Lord Brooke of Sutton Mandeville]

My Lords, the whole of your Lordships’ House is in debt to the right reverend Prelate the Bishop of Derby for securing and launching this debate. If I follow him in telegraphic mode it is because four minutes is a tiny span given the complexity of the debate’s subject. I also welcome my noble friend the Minister to these matters, which respond well to his past experience.

The coalition Government have fundamentally changed the basis of UK tax in this area. Previously we used at least to seek to tax UK-based companies on their world-wide profits, if sometimes with variable success. Now we have moved to a territorial tax system so that only profits arising in the UK are HMRC’s target. The logic of this is not the subject of this debate but it is a salient background point. If profits arising in Africa, Latin America or elsewhere are no longer in our purview and we make no claim on them, it will cost us little to help such countries to collect the taxes owed to them and we potentially make our own aid giving more effective in the process. In this regard, justice marches hand in hand with national and international interest.

The right reverend Prelate alluded to building a tax capacity in the third world, and both DfID and HMRC do valuable work in this area. I hope we can extend this to enlarge DfID’s own tax capability. This would promote DfID reinforcing the Prime Minister’s clear intention that tax should be at the centre of his agenda for the G8 next year. In the mean time, I hope that the Minister in his wind up will give examples of current tax help that we are bestowing on developing countries.

For this intention to work, we need to ensure that we go beyond finding solutions that work for ourselves and more widely for the G8 and find solutions that work for all countries. If due and proper revenues are effectively raised by developing countries, then present desperate poverty can, in part, be assuaged to the mutual benefit of all. The G8 conference can be an opportunity for the rest of the G8 and ourselves to make a pellucid commitment to developing countries that we shall put our own houses in order to prevent our structures being used to evade tax in developing countries, and that the G8 will use its power and influence to persuade others to change as well. It is a good and honourable cause and we should be grateful to the right reverend Prelate for having raised it.