UK Encouraged to Assist Tax Authorities in Developing Nations

August 24, 2012 International Tax CooperationTaxation in UK

Developing nationsLONDON – The UK should place less emphasis on aiding developing nations through donations, and instead should concentrate on helping poor countries improve their tax systems.

The UK could take more steps to support tax authorities in developing nations to build self-sustaining tax systems and reduce reliance on international donations and aid, according to a new report published on August 23rd by the International Development Committee of the UK Parliament. Currently the UK spends over GBP 7.8 billion per year on foreign aid, with the donations expected to rise to more than GBP 11 billion per year by 2015.

Commenting on the benefit of helping tax authorities in developing countries to build efficient tax systems, the chairman of the Committee 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”

Providing help to foreign tax authorities will also be better “value for money” for UK taxpayers, compared to making donations, as the amount spent on support will have a greater positive impact for the receiving country than the same amount would as an aid payout.

The Committee also encouraged the government of the UK to conduct an analysis of its current regulations for the taxation of controlled foreign companies, saying that the present rules could encourage UK businesses, which are doing business in developing nations, to make use of tax haven jurisdictions and reduce their tax liabilities in developing countries and in the UK.

Photo by DFID – UK Department for International Development