Q&A: UK should take lead on tax transparency ? lawmaker

LONDON (TrustLaw) - Anas Sarwar, a British lawmaker from the opposition Labour Party, introduced a bill in parliament this month which, if it becomes law, will force extractive industry companies that are listed on the London Stock Exchange to publish what they pay to governments.

TrustLaw spoke to Sarwar on March 8 about the bill, whether it will be duplicating similar legislation in the EU and whether it will put extractive companies, listed on the London Stock Exchange, at a competitive disadvantage.

Why are you introducing this bill and why now?

One of the first things I did (when elected as a MP) was stand for election to the international development select committee which I was fortunate enough to be voted into by my colleagues. One of the first meetings I had was with several NGOs who deal with tax transparency in developing countries. I was shocked to hear that developing countries lose three times as much in tax as they receive in aid. One of the key areas is transparency around the extractive industries; following on from the Dodd-Frank Bill and the Cardin-Lugar amendment in the U.S., we’ve got an opportunity here in the UK to show real leadership. The UK’s always shown leadership on development issues, whether it was the 0.7 percent target or carbon emissions targets, the UK’s always played a leading role and I think when it comes to tax transparency, the UK should be taking a lead. If we’ve got €1.3 trillion of the €2.3 trillion capital budget for extractive industries listed on the London Stock Exchange, we can set a massive example in the UK for little or nothing, no cost at all.

Do you intend for this bill to mirror the Dodd-Frank Act?

I think it’s a process. We need full tax transparency in developing countries not just from extractive industry companies but from all multinational organizations but I think we need to make a start with the extractive industry companies, listed on the London Stock Exchange. In times of austerity, people are thinking, we don’t want to commit to legislation that’s going to cost us massive amounts of money. This is actually going to save us money in the long term. Number one, it’s not going to cost any money to implement the law, it’s not a new budget commitment in terms of cash as a percentage of GDP and also if we can get developing countries to maximise the benefits of their own resources in country, then it means the aid dependency that those countries might otherwise have will not be there. It means that the UK can focus on other issues.

While introducing your bill, you referred to the fact that extractive industry transparency legislation has been championed at the EU level but that you believed that UK legislation was needed nonetheless because EU laws would take too long to come into effect. If the UK acts alone, would UK companies not be disadvantaged as they wouldn’t be operating on a level international playing field? 

UK companies are already slightly disadvantaged in terms of the level playing field because the U.S. has passed legislation. So in actual fact it would benefit UK companies and make sense to bring the London Stock Exchange in line with the New York Stock Exchange. That’s why I think we should take the lead in the UK. The problem we’ve got is that if we wait for the EU, it could take months, it could take years; there’s millions of pounds being lost from the poorest areas of the world every single day and (that money) could be spent on schools or hospitals or doctors or clean water but they’re not being spent on those things at the moment, they’re being wasted, through corruption or (companies) not paying their tax or being siphoned off by corrupt government officials in-country. That’s why we can set an example in the UK, by passing the legislation in the UK and I think if we did that, it could also speed up the process in the EU as well.

Do you have a timeline in mind as to when you’d like to see your bill come into effect?

As soon as practically possible is the ideal answer. I think there’s a lot of lobbying to be done. If I’m honest with you, the bill in of itself is not going to be the way of getting this passed. The bill is in a sense a process of getting the issue out there, getting parliamentary support, rallying support around the country, rallying support around NGOs and charities. What we need is the support from the government and real action from the government. I’m delighted by the fact that we’ve got 600 networked organisations right around the world through the Publish What You Pay coalition who support the bill. I’m delighted that we’ve got almost 20 charities here in the UK that support the bill. We’ve got the support of leading economists; we’ve got the support of leaders in developing countries; we’ve got the support of leaders of developed countries like Sarkozy and cross-party support in the House (of Commons) itself. As I say, it’s a very simple bill to put into place but it could potentially have massive consequences in a positive way for millions of the poorest people right around the world.

If the bill was voted on tomorrow, would it fail as it stands?

I think we’re having positive noises from the government, I don’t want to sound pessimistic as if to say the government aren’t supporting it, I think we have had positive noises from the government at an EU level but I think it needs to be put to the test as to whether we have those same positive noises at a UK level. I think we certainly have cross-party support on it and if it came from the House and everyone heard both sides of the argument, I think it’s a bill that would get strong support from the House and strong support from the British people.

Have you discussed the bill with the UK’s Department for International Development (DFID)?

Yes, I’ve put the question several times at the International Development Committee. I also put the question to the World Bank, International Monetary Fund (IMF) and USAID when we were out in New York and Washington doing an enquiry into the World Bank, the IMF and the UN. There is positive support for it from people who work in development and from people who work in tax transparency. There is real support, it’s just about trying to get on the legislative agenda in the UK.

Will the bill also aim to catch payments that companies in the extractive industry make to government middlemen?

What we’ve said in the bill is that we want any payment that are made to any national government, any company that’s partially or wholly owned by a government, to be published on a country-by-country and a project-by-project basis. I think there is an element of having to look at third party payments that are made but again, I think we can do that through the actions of the bill.