I blogged a little while ago about the International Development Committee recommending that the UK concentrate more efforts on helping developing countries to administer their tax systems more effectively. However, the less well-publicised aspect of the IDC’s comments related to the impact of UK anti-avoidance legislation on the tax systems of developing countries.
The IDC focused in this respect on the revised Controlled Foreign Company (CFC) rules. Designed to discourage UK-owned corporations from using tax havens to shelter profits, the revised version restricts its scope to companies operating in the UK. The charity Action Aid has suggested that, by encouraging those operating in developing countries to use tax havens, this legislation could cost developing countries up to £4 billion in tax revenues. The IDC has urged HMRC to produce its own figures in this respect, on the basis that such a result would undermine the UK government’s attempts to make developing countries less dependent on aid.