Anti-corruption Summit

Patrick Grady Excerpts

Tuesday 3rd May 2016 Westminster Hall

[Patrick Grady (Glasgow North) (SNP)]

It is a pleasure to serve under the chairmanship of a fellow member of the Procedure Committee, Sir Edward. Indeed, 10.35 is incredibly generous—I hope that is not an act of patronage or corruption because we are on the same Committee. I will endeavour to be as brief as I can. Many of the points that I wanted to make have already been very well made in the debate.

I want to consider the impact of corruption overseas, in developing countries, some of the steps that can be taken to address that issue and the leadership role that the UK Government have in that, but I will briefly reflect on the speech by the hon. Member for Folkestone and Hythe (Damian Collins) about FIFA. I do not know whether this is strictly within the limits or purview of the forthcoming summit, but in advance of the recent FIFA presidential election, I called for the Scottish Football Association to take an indicative vote of the members of its travel club, the Tartan army, on which of the candidates for the presidency they would prefer to see elected; perhaps it could inform the choice of its delegates. I do not think that necessarily happened, but it would be interesting to look at that kind of democratisation and shedding a bit of light on some of the processes of these great global bodies that control so much money and so much public interest but have so little accountability.

Let me move on to the specifics of the impact of tax dodging and corruption overseas. There is a tax gap in the UK between what it is estimated could be collected and what is actually collected. How much is lost through tax dodging and corruption? At least, however, we have a tax base to begin with. In developing countries, corruption and tax dodging can hit economies very badly indeed. Some estimates suggest that about $1 trillion flows out of developing countries via illicit financial flows every year. As a result, the continent of Africa is actually a net creditor to the world economy; that is not something that is generally understood.

The OECD has estimated that tax havens may be costing developing countries a sum that is up to three times the size of the global aid budget. In a few weeks, we are expected to debate the aid budget here in Westminster Hall. If people really want a reduction in global aid budgets, the money for resources to take people out of poverty in developing countries has to come from somewhere, and it has to come from developing countries being allowed to develop their own tax base. At the moment, the impact is there for all to see. A lack of infrastructure, development being held back, and weak health and education systems compound all the other development challenges that we so often hear about in Westminster Hall.

There is a particular challenge in the extractive industries. Addressing corruption in those industries must be a priority because a huge amount of resources and revenues for development is lost through bribery and corruption. In a sense, we are robbing some of the poorest countries in the world twice through a lack of accountability within the extractive industries: once when materials are extracted in poor labour conditions or in the shadow of conflict; and again when we allow tax to be dodged or profits to be siphoned off. Look at the Democratic Republic of the Congo. It should be one of the richest countries in the entire world—we all carry a little piece of the DRC around in our pockets in our mobile phones—yet it is one of the poorest. Tackling those financial flaws is crucial and ought to be a key priority for the summit.

Probably the most repeated phrase today is that we must get our own house in order. It is correct that we are not immune here in the UK, and we have heard about money laundering in the property market. People have suggested—I will not make any specific accusations, as that would be completely out of order—that there is a correlation between donations to political parties and seats in the House of Lords, right at the very heart of our so-called democratic system. The examples that we set to the rest of the world, including soft power and systems of patronage in the UK, must be looked at.

Alternatives do exist. Look at how the Scottish Government have taken forward the tax powers that they have been given. They have also introduced general anti-avoidance rules, described by various commentators as one of the strongest measures in the European Union. The convener of the Tax Law Sub-Committee of the Law Society of Scotland, Isobel d’Inverno, said:

“The general anti-avoidance rule that we have got in the Scottish legislation is much fiercer than the UK one. It’s a very much firmer ‘Keep off the grass’ sign than the UK one is. Revenue Scotland also appears very determined to collect all the tax that is due.”

It would be interesting to hear what discussions the Minister has had with his Scottish Government counterparts on that matter.

As we approach the EU referendum, it is worth reflecting on the benefits of EU membership to global anti-corruption efforts. The EU anti-money laundering directive launched in June 2015 has been a huge boost to international efforts and is one factor that has helped to drive the UK Government’s process of setting up beneficial ownership registers.

It falls to the UK Government to take action now and to show leadership through the summit. We have heard calls demanding action from the overseas territories in publishing beneficial ownership registers. We have also heard that there are precedents to do so, as the Government have previously required progress from the overseas territories. It would be useful to hear what the Government’s intentions are and whether they intend to set any kind of date for taking such steps.

The Government are in the process of reviewing the tax treaties they have with a number of developing countries. Scottish National party Members have spoken several times about the tax treaty with Malawi. It would be interesting to know how other tax treaties will be reviewed to ensure a fight against poverty and a fight against the flight of tax in an open and transparent way, and that extends to how we empower communities in developing countries to hold their own Governments to account.

It is important that the Department for International Development continues to support governance and civil society organisations to hold Governments to account and to ensure that they collect the tax they are due. It would be interesting to hear about that and about any other steps the Government will take, including on country-by-country reporting—requiring companies to publish the tax that they are paying in developing countries—especially regarding the extractive industries. Tax can be a key to unlocking resources in developing countries and a route out of poverty, and the summit is a chance for the Government to show leadership.