Foreign aid strategy should focus on tax collection, MPs say

 
Roadside shop in Lahore, Pakistan Pakistan has shown the way by boosting its tax take by a quarter in the past year

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The UK should give more priority to helping the poorest countries collect their taxes as part of its foreign aid strategy, MPs have suggested.

The Commons International Development Committee said dependable tax revenues were a far better route out of poverty than reliance on overseas aid.

In a report, it said supporting more efficient tax collection represented "excellent value" for UK taxpayers.

The UK spent £7.8bn on aid in 2011 and this is set to rise to £11bn by 2015.

The government welcomed the report and said it was "firmly committed to helping developing countries access more sustainable sources of revenue".

Amid cuts in other departments, the foreign aid budget is being protected to help the UK meet its target of spending 0.7% of national income on aid by 2013.

The cross-party committee said an efficient and transparent tax system was of "fundamental importance" to a country's economic and social development.

Tax havens

It urged ministers to support the authorities in developing nations to improve the collection rates of income tax, VAT and local property taxes and to ensure governing elites paid their fair share.

"If developing countries are to escape from aid dependency, and from poverty more broadly, it is imperative that their revenue authorities are able to collect taxes effectively," the committee's chairman, Lib Dem MP Malcolm Bruce said.

"The aim of development work is to enable developing countries to escape from over-reliance on aid.

"Supporting revenue authorities is one of the best ways of doing this: it represents excellent value for money, both for the countries concerned and for UK taxpayers."

In their report, the MPs expressed concern that recent changes to tax rules affecting UK-owned companies operating exclusively abroad could make it easier for them to use tax havens and reduce their tax liability in developing countries.

Aid agencies have estimated this could cost developing countries billions in lost tax revenues and the committee said the government should consider reversing the changes "as a matter of urgency".

"The government is committed to supporting economic growth in developing countries to reduce their dependency on aid. While this is clearly the right thing to do, it would be deeply unfortunate if the government's efforts were undermined by its own tax rules," Sir Malcolm added.

Ministers should introduce rules requiring companies to publish financial information on a country-by-country basis to discourage cross-border tax evasion, the report said.

A government spokesperson said: "The Committee is right to praise British aid for helping poor countries to boost their tax systems and help them to pull themselves out of poverty by investing in schools, hospitals and infrastructure.

"We will consider the detailed recommendations carefully and will produce a formal written response in due course."

 

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  • rate this
    0

    Comment number 416.

    To quote Jeffrey Sachs from the 2007 Reith Lectures, "we would need around $70 billion per year to enable Africa to get on to the ladder of development. That's $70 per person per year from each of us in the rich countries. It's about 0.2 percent of our annual income. Indeed, it's about 2 percent of the estimated wealth of the world's 1,000 billionaires". It's not much to make a huge difference

  • rate this
    0

    Comment number 415.

    #384: I guess what you are saying is that your opinion that the Cayman Island is a front for money laundering is worth more than the opinions of a myriad of international organisations that have looked at this over the last few years.

    All countries have the right to set tax rules as they see fit. If that is enough to meet their public spending obligations then they are not a tax haven

  • rate this
    0

    Comment number 414.

    //Total Mass Retain
    2 Hours ago
    "The Bloke
    That's how you regard all claimants, is it?"

    I appreciate you live in a world of syllogistic fallacies so one bad immigrant means all are (to you). //

    Stop inventing, though I know it's all you've got to go on.

  • rate this
    -1

    Comment number 413.

    Charity begins at home - it is awful that £billions are being given away to countries who hates us and/or do not need the money, when our own people are suffering! For once, put British people first - suspend all foreign aid until we're back on an even keel!

  • rate this
    +1

    Comment number 412.

    This is laughable when it is Lords and former Lords that run many of these offshore institutions, can we also start collecting tax at home? It is said that 100 Lords are non domiciled, one of whom former Lord Ashcroft has a personal wealth greater than Belizes GDP he owns their biggest bank. Belize -notorious drugs hub to USA. Let them create /issue their own money and they will escape poverty

  • rate this
    0

    Comment number 411.

    //Bibi
    4 Hours ago
    With every passing year westeners become more and more self-serving and blinkered//

    Care to back that up with some facts?

  • rate this
    +1

    Comment number 410.

    "This must be the biggest waste of money ever known. . ."

    Oh, I don't know: that whole Iraq war thing cost a bob or two. . .

  • rate this
    0

    Comment number 409.

    @408. Total Mass Retain
    Agreed and though it pains me to say it as I am right leaning, what appalls me most is what appears to be the complete randomness of current gov policy particularly in this area. They appear to be hell bent on recovering small amounts of gov spending that has a disproportional -ve effect on those effected whilst increasing this, importantly, without apparent explanation

  • rate this
    +1

    Comment number 408.

    "bangers64
    There is a case for charity begins at home"

    But we spend about £250B addressing problems of RELATIVE poverty at home. Spending £9B a year to address REAL, ABSOLUTE poverty in the world is neither too much to ask nor does it materially deprive those in relative poverty here of very much.

  • Comment number 407.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 406.

    As Ron Paul once said on foreign aid: 'Foreign aid is when money is taken from poor people in rich countries and given to rich people in poor countries'.

    Discontinue this faux 'well-intentioned' policy.

  • rate this
    0

    Comment number 405.

    @403. Total Mass Retain
    OK, it is true, theas people live in true poverty, the grim reaper sits at thire table every single day of there lives
    BUT
    Humans are humans, this happens a long way from home and people hear are seeing considerable reductions in lifestyle, some seeing catastrophic financial impact to their lives. There is a case for charity begins at home

  • rate this
    +2

    Comment number 404.

    "The Bloke
    That's how you regard all claimants, is it?"

    I appreciate you live in a world of syllogistic fallacies so one bad immigrant means all are (to you). It does not follow that because I think SOME peopel on benefits are undeserving, that I think all are. But the 120,000 dysfunctional (out of several millions) is well documented.

  • rate this
    +2

    Comment number 403.

    "bangers64
    1. This alowence is NOT for dysfunctional familys as you call them it is for disabled people( the clue is in the name)"

    I KNOW.

    We also provide £9B to fund 120,000 dysfunctional families. If the withdrawal of the DLA is due to funding rather than need, then I would suggest with start by cutting money from them than taking it from providing clean water to the world's poorest. Got it?

  • rate this
    +2

    Comment number 402.

    Setting the best example here would be a good idea first by collecting all the squillions fiddled by the few...Then & only then do you have the right to lecture others!

  • rate this
    -1

    Comment number 401.

    Why not plan for an agreed figure, but relate the aid actually given each year to the tax recovery level achieved by the recipient country in the previous year?

  • rate this
    -1

    Comment number 400.

    //Total Mass Retain
    9 Minutes ago

    I suspect they'd rather that money went to providing clean water to the poorest in the world than providing chav families with playstation, Sky subscriptions and luxury cars.//

    That's how you regard all claimants, is it? If the govt deals with it, the left whinges, if it doesn't,..the left whinges.

  • rate this
    0

    Comment number 399.

    @396. Total Mass Retain
    1. This alowence is NOT for dysfunctional familys as you call them it is for disabled people( the clue is in the name) some of which are able to contribute to the country as a result.
    2. Nobody is taking money from the worlds poorest, we are just mitigating the money GIVEN by resolving one of our issues first.

  • rate this
    -1

    Comment number 398.

    The ONLY foreign AID is

    FREE SUPPLY of CONDOMS

    AND Birth CONTROL measures

    For Phil SAKE !

  • rate this
    -1

    Comment number 397.

    No more money should be handed over full stop.
    I would like a government run project where counties submit plans for infrastructure and projects that they want undertaking with detailed information on what the positives will be,
    I would then employ UK workers to go and carry out the task paying them direct and buying all material direct preferable where possible from UK tax paying companies

 

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