14 January 2014 | by Joseph Stead
MPs on Parliament’s Business, Industry and Skills Committee investigated far and wide in 2013 – their probes have included the Royal Mail privatisation, the UK retail sector, women in the workplace and payday loan companies.
Mining in the Democratic Republic of Congo
Britain's extractive companies
But they’re now about to return to arguably their most interesting inquiry, into Britain’s extractive industries. As the MPs say, Britain has become an international centre for mining, oil and gas companies – Glencore Xstrata, Shell, Centrica, Rio Tinto, BHP Billiton, BP and their ilk.
Several hundred such firms are now thought to be listed on the City of London’s financial markets.
The MPs’ call for evidence is all about how extractives companies affect the UK, including its international reputation. Some such firms, after all, have been accused or found guilty of tax evasion, corruption, human rights abuses and despoliation of the environment, often in poor countries.
Back in the UK, it’s not just MPs who think that perhaps Britain should exercise greater control over the extractive firms listed in London. Prime Minister David Cameron himself suggested as much this summer, when the UK hosted a meeting of G8 country leaders.
In a speech on the evils of tax evasion and corruption, he argued that rich countries should help poor countries collect the taxes they are due, by ‘ensur[ing] our extractive companies are accountable and transparent in their dealings’.
Christian Aid's view
Christian Aid wholeheartedly agrees. In our evidence to MPs, we argue the UK has a substantial influence over extractive companies around the world – and a duty to help people living in poverty benefit from the natural wealth in which extractive companies deal.
This is morally right and also in our interests. After all, if poor countries can’t reap the multi-billion dollar benefits of their countries’ copper, diamonds, bauxite, oil and so on, then how will they stop needing foreign aid?
Christian Aid estimates that tax dodging by multinational companies currently robs poor countries of $160 billion a year – far more than rich countries give them in aid. Of course, extractive firms are not responsible for all of this but they account for a high proportion of poor countries’ exports, so they very likely bear a disproportionate share of blame.
In our evidence to MPs, Christian Aid argues the UK should use two reforms to ensure extractives companies pay their fair share.
First, we believe this country should require extractive (and indeed all) companies listed in London to publicly reveal a range of information such as the profits they make and the taxes they pay, separately for every country in which they operate.
A similar reform is already on its way, because governments have realised that they need the information to catch up with tax dodgers. But crucially, governments are not planning to make the information public.
We hope to persuade MPs that it should be. Then suspicious details are all the more likely to be spotted and investigated – and rich and poor countries will bring in more tax as a result. Citizens will also be able to see much more easily the contribution that companies are making (or not) to their society, through tax and in other ways, such as investment and jobs.
The other reform we recommended to MPs is a requirement for all companies to publicly reveal who really owns and controls them. At present, some owners are getting away with serious crimes, safe in the knowledge that even the police are unlikely ever to trace them.
In one notorious case in Africa’s Democratic Republic of Congo (DRC), state-owned mines were sold to anonymous ‘shell’ companies in the British Virgin Islands at well below their market price.
The mines were then sold on at a much higher price to major extractives companies, including some listed on UK financial markets. The deals are thought to have cost the DRC $1.35 billion – twice the country’s health and educationbudget. Those who benefitted - the shell companies’ owners - remain hidden.
Some extractive companies themselves want greater transparency around who is really in charge, because they often have to partner with local companies, without being sure who they are really dealing with.
The good news is that the Government listened to them and the many others demanding reform. In late October, David Cameron announced the creation of a new, public register of the roughly three million people who own UK companies.
Argument is still raging about the details of the new register – should it also include the owners of trusts and foundations, for instance? Many reformers, including Christian Aid, believe it should. Other questions, such as how much information the register includes and how easy it is to obtain and use, may seem minor but they will have a huge impact on the register’s usefulness.
Having made the big decision to create a public register, the Government must not now undermine it by getting the details wrong.
Even a perfect UK register won’t solve global corruption and tax evasion. But it is an important start, which will encourage other countries to follow suit. The losers will be people and companies with something to hide. The winners will be honest companies which play fair - and ordinary people around the world.
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