David Cameron has promised to deliver “proper tax justice” as leaders of the G8 nations agreed a pact to crack down on tax havens and companies shifting profits to avoid paying their fair share.
The Prime Minister said the agreement secured at the Lough Erne summit in Northern Ireland had the potential to “rewrite the rules” on tax and transparency.
The Lough Erne Declaration signed by the UK, US, Germany, France, Italy, Canada, Japan and Russia promises to “fight the scourge of tax evasion” by ensuring automatic exchange of tax information and forcing companies to reveal the identities of their ultimate owners.
To tackle corruption linked to the trade in resources like oil, gas and minerals in the developing world, extractive industries and governments should publish details of what money changes hands, the agreement said.
It came as Number 10 tax adviser Paul Collier warned African countries are losing twice as much in avoided tax as they are getting in aid from the West and said company directors had a “duty” to ensure their firms paid their share of tax.
New mechanisms to ensure multinational companies pay taxes in the countries where they earn their profits will allow the authorities to “track and expose those who aren’t paying their fair share” and ensure “we get proper tax payment and proper tax justice in our world”, he said.
However, the 10-point document, released after two days of talks at Lough Erne, falls short of the demands of anti-poverty campaigners.
The declaration only says developing countries “should have the information and capacity to collect the taxes owed them”, rather than guaranteeing them automatic access to the information.
And it states “tax collectors and law enforcers” should have access to information about the ultimate owners of companies, leaving it to individual G8 countries to decide whether to make the information public, as campaigners are demanding.
Sally Copley, spokeswoman for the anti-poverty campaign Enough Food For Everyone If said: “The G8 tax deal is a step in the right direction but it also leaves major unfinished business.
“Although the G8 has set out the right ambition on information exchange, poor countries battling hunger can’t afford to wait to be included.”
Adrian Lovett, Europe executive director at the One campaign, said the G8 declaration amounted to the start of a “transparency revolution”.
However, he added: “Despite the leadership demonstrated by the UK and France, the G8 collectively has taken only small steps to crack down on the phantom firms playing such a role in robbing Africa of its resources.
“David Cameron and Francois Hollande must now lead the fight in Europe, driving efforts to get EU members to agree to make information about who really owns and controls companies public.”