DFID releases £6m to boost tax collection across developing world

20 Nov 13
The UK is to spend £6m on helping developing countries improve their tax-collection processes and combat avoidance and evasion, International Development Secretary Justine Greening announced today.

By Judith Ugwumadu | 20 November 2013

The UK is to spend £6m on helping developing countries improve their tax-collection processes and combat avoidance and evasion, International Development Secretary Justine Greening announced today.

The funding will go towards four international projects, helping boost revenues by up to £100m over the next four years, DFID said.

‘An effective tax system is at the heart of an effective state. Sustainable tax revenues provide essential funding for public services and ultimately allow developing countries to stop being aid dependent,’ Greening said.

DFID plans to work with the Organisation for Economic Co-operation and Development and the World Bank to provide ‘expert advice to help up to 12 developing countries’ adopt and implement transfer-pricing rules. The aim is to make it harder for multinational companies to avoid tax. This would also include the deployment of experienced tax auditors to developing countries to help settle tax issues.

Developing countries will also be helped to participate in international exchange of tax information and join the Global Forum on Tax Transparency and Exchange of Information.

DFID said project pilots saw a 76% rise in revenues from multinationals in Colombia and an additional £14.8m of revenue in Kenya.

The OECD added that it would undertake reviews of poor countries’ tax incentives for investment to improve the transparency and value for money.

Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, said: ‘These resources will go a long way towards helping developing countries to tax more effectively and more fairly and to stem the tide of tax base erosion and profit shifting.’

Responding to the announcement, campaigners said the clampdown on tax evasion must involve both rich and poor countries if it is to stop criminals hiding billions from the taxman.

Oxfam’s policy advisor Maria Villanueva said: ‘Without poor countries’ governments having a say on how a new tax system can work for them from the start, there’s a real danger the world’s poorest people will continue to be hit hardest by tax evasion.

‘Tax evaders are already robbing poor countries of billions that could pay for vital public services, such as hospitals, schools and roads. Rich countries, whose banks are facilitating tax evasion, have a duty to help change the status quo, instead of continuing to profit from it.’

 

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