Tax (Developing Countries)

Pauline Latham Excerpts

Thursday 17th January 2013 Westminster Hall

[Pauline Latham (Mid Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship again, Sir Roger.

I am pleased to speak in this debate on the report on tax in developing countries published by the Select Committee on International Development. It is difficult for us to lecture other countries when we do not have our own house in order. I am pleased that the Chancellor is considering how he might tax companies that are not paying their fair share of tax here because, like developing countries, we need tax to address our deficit if we are to continue—and we will continue—to fund international development and many other things. I will be pleased when the Chancellor of the Exchequer returns to tell the House of Commons exactly how he will do that, because it is important. I completely support my two colleagues who spoke before me, my right hon. Friend the Member for Gordon (Sir Malcolm Bruce) and the hon. Member for Birmingham, Northfield (Richard Burden).

I will focus on the part of the report on the role of the extractive industries transparency initiative, which was mentioned by both my colleagues. I am particularly interested in that topic, on which I have tabled written parliamentary questions, and next month I will be visiting a coal mine in South Africa with the Industry and Parliament Trust. I was going to go to a diamond mine, but I have been downgraded, although there will be no problem with free gifts at the end of the visit.

I currently chair the extractive industries transparency initiative group, which is currently an informal body, but I am hoping for it to become an all-party group very shortly as I have just found a final member. At a meeting of the group before Christmas, our guest speaker was the chair of the EITI, the former Secretary of State for International Development, the right hon. Clare Short, who provided a valuable insight into the EITI’s worthwhile work.

The establishment of the EITI was a massive step forward, and I pay tribute to the previous Labour Government for taking the lead in founding the initiative. The underlying principle of the EITI is that Governments disclose the amounts they receive from corporations in the extractive sectors, including payments of taxes, signature bonuses and royalties, and corporations operating in participating countries make a corresponding disclosure of the payments they make to the respective Governments. An EITI report for the relevant country is then published, reconciling the amounts paid by corporations with the amounts received by the Government. Any discrepancy between the two amounts may indicate that revenues are falling into the hands of corrupt officials, which is not unusual in many of the countries we talk about in the international development sector. The methods used are an extremely effective way of identifying possible corruption, and ensuring that the two figures correspond is one way in which people in participating countries are able to call their Governments to account.

There are two stages of EITI accreditation: EITI candidate status and EITI-compliant status. There are 14 countries with compliant status, although one of those, Yemen, is currently suspended, and 21 countries with candidate status.

The EITI has a robust yet flexible methodology—the EITI standard—that ensures a global standard is maintained throughout the implementing countries. The EITI board and international secretariat are the guardians of that methodology. Implementation, however, is the responsibility of individual countries. The EITI standard, in a nutshell, is a globally developed standard that promotes revenue transparency at local level. The EITI rules establish the methodology that countries must follow to become fully compliant with the EITI.

As much as I am a big supporter of the EITI, however, I believe that more than a decade since its establishment—and a productive first decade it has been—the EITI needs to go further in its transparency work. As the report advocates in its recommendations, the time has come for the EITI to publish contracts between mining companies and Governments. The “Publish What You Pay” campaign suggests that such publication would help to expose any contracts that are patently disadvantageous to the country concerned. We only have to look at many countries in Africa to realise that they are mineral-rich, but money is not going back into those countries for Governments to invest for the benefit of their people, not just the higher echelons in society. It is important that such publication goes ahead.

[Sir Malcolm Bruce]

My hon. Friend is making a valuable contribution with her important speech, but does she acknowledge that, prior to the emergence of the EITI, we had situations, such as in Angola, where BP, to its credit, wanted to publish information on the taxes it paid and was basically told by the corrupt Minister who was pocketing those taxes that if BP did so, it would be thrown out of the country and not be allowed to continue its activities? The EITI has done an awful lot to prevent such things, thereby exposing those countries and Governments who will not sign up.

--- Later in debate ---

[Pauline Latham]

My right hon. Friend makes an important point. Some companies do want to do the right thing by publishing information so that people in those countries know how much money is going to the Government that could be invested in health, education, women’s rights and the whole gamut of things that we try to promote through our international development money. It is important that EITI goes further.

The thing that disappoints me, and has obviously disappointed my right hon. Friend and the hon. Member for Birmingham, Northfield, is that although we were the founders of the EITI, we are not a member. The report states:

“If the Government genuinely hopes to encourage more developing countries to sign up for EITI, it must be willing to lead by example.”

As with the tax we are not collecting, we must sign up to the initiative.

Recommendation 11 suggests that the UK should become a member and that the EITI should request the publication of contracts. The Department for International Development has responded by saying it “partially agrees,” and I am therefore partially pleased, but I urge the Government to re-examine their position on that recommendation. Rather like the tax that the Chancellor has not been collecting from companies in this country, we must lead by example by getting our own house in order before we tell anyone else how to run their country—not that we should be telling other people how to run their country. We should assist countries by giving them best practice, which is an important point for Britain to lead in the world.

I hope the report will make a real difference to the economies of developing countries, because it is one of the most important reports since I became a member of the Committee.