UK aid’s contribution to tackling tax avoidance and evasion
ICAI examined DFID’s efforts to influence the international tax reform agenda, to make new tax standards accessible to developing countries.
In an increasingly globalised world, many wealthy individuals and multinational corporations have developed sophisticated cross-border strategies to avoid paying tax, using loopholes in the global financial system. The resulting loss of revenues affects both wealthy and poor countries. Tax havens and non-cooperative jurisdictions enable wealthy individuals to hide their wealth, evade tax and launder money from illicit activities. There is heightened public interest in these issues following the recent leak of documents from the Panamanian law firm, Mossack Fonseca & Co.
In its aid strategy, the UK government has committed itself to going ‘beyond aid’ in its pursuit of global poverty reduction – that is, not just funding development programmes, but also working to change UK and global policies and systems to create more opportunities for developing countries. One of its priority areas for working beyond aid is tax. In recent years, the Department for International Development (DFID) has worked through the G20 group of countries and the Organisation for Economic Cooperation and Development (OECD) to help developing countries implement new international standards designed to combat tax avoidance and evasion.
This review explores how well DFID has used its influence across the UK government and with international partners to help developing countries benefit from these standards. It also assesses how DFID has used its aid programmes to promote the participation of developing countries in international tax standards, and to support other tax and development initiatives.
As a result of our findings, we awarded an amber-red score and made four recommendations.