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June 14, 2013 / politicsbitesize

Will the G8 Summit bring an end to tax avoidance?

G8logoIn an interview on Sky’s Murnaghan programme, Vince Cable, the Business Secretary, called tax havens ‘shady places for shady people’.  He told the programme that the UK Government’s powers to prevent tax avoidance were ‘limited’ and that the only way to try to prevent the practice would be to develop ‘tough international rules’.  His comment comes after revelations that Vodafone has not paid corporation tax in the UK for a second year running and that Thames Water has been diluting its tax liability via the Cayman Islands.

The Lib Dem business secretary went on to say that ‘tough international rules’ may well be established at the G8 Summit due to take place early next week.  Leaders from Canada, US, UK, France, Germany, Italy, Russia and Japan will meet at Lough Erne in Northern Ireland from 17-18 June 2013.  In January this year the UK assumed presidency of the G8 and David Cameron is determined to set a robust agenda for the 39th meeting. 

The British Prime Minister is hoping to effect change in three major areas critical for growth, prosperity and economic development across the world. His priorities are: advancing trade, ensuring tax compliance and promoting greater transparency.  In a recent article for the Wall Street Journal, David Cameron outlined his plan to discuss a free trade area between Europe and the US, to ensure there is a greater transparency in trade deals performed globally, and the need for global rules that prevent tax evasion and aggressive avoidance.

In the lead up to the G8 meeting the Prime Minister has placed great emphasis has on the issue of tax evasion.  This may in part be due to pressure from reports that highlight that a number of big international companies have been using tax loopholes to avoid paying their fair share of tax.  A G8 fact sheet on tax published by the Cabinet Office states that: ‘there are some forms of avoidance that have become so aggressive that the UK believes it is time for governments to act’.  In order to implement action the UK is determined to ‘galvanise international action on tax evasion’ and ‘demonstrate a determination to deal with challenges posed by shifting profits to low tax jurisdictions’.

But for now all this is just rhetoric.  Whether or not any real change will take place isn’t just down to the British Prime Minister or the G8:  it will take a global effort that includes the very wealthy businesses that are, at present, taking advantage of the loopholes that are in place.  The secretive meeting of the Bilderberg group, which took place in a luxury hotel near Watford last weekend, will have included the leaders of these businesses.  David Cameron was in attendance, but will he have told them what he is telling us?  If tax avoidance is therefore to be thwarted, he states ‘we need global rules that prevent tax evasion and aggressive avoidance, and enable governments to collect the taxes they are owed.’

For change on this issue to be effective strong leadership and the determination to do the right thing for the majority, rather than the minority, will be required.  But if David Cameron is reluctant to take on City of London banking executives over their controversial bonuses, then how does he imagine he will be able to stand up to the bigger global corporations?  Time will tell whether the British Prime Minister has it in him to make a difference.

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