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Tax cheats at top of G8 agenda

For the three Rs, read the three Ts: trade, tax and transparency.

David Cameron was at the World Economic Forum in Davos yesterday, spelling out his blueprint for Britain's presidency of the G8 this year. Coming only 24 hours after his Bloomberg bombshell, promising an in-out EU referendum, it risks being overshadowed. Yet it was full of insight and good sense that chimed with both business leaders and the NGOs in his audience.

The Prime Minister attacked both illegal tax evasion and legal but morally dubious "aggressive" tax avoidance, which rob public services of resources and undermine the integrity of tax systems. And he delivered a calculated side-swipe at Starbucks by suggesting such companies should "wake-up and smell the coffee".

Unlike his EU plans, which Nick Clegg yesterday blasted as "wholly implausible", here was a speech which the Deputy Prime Minister could have written himself. In fact, it picked up on both the theme and tone of business secretary Vince Cable's comments in November about corporate tax abuse.

Mr Cameron is right to put this issue at the top of his G8 agenda. It can be tackled only on an international basis because of the mobile army of clever lawyers and accountants scouring the world for the best tax deals for their clients. His words will resonate with British campaigners, outraged about tax unfairness, but also charities such as Oxfam that witness shabby deals on land and tax between global companies and corrupt governments in the developing world that rob the poor and enrich only a tiny elite.

In fact, this is a key theme of the "Everyone Could Eat If" campaign launched by NGOs and faith groups this week. Poor countries lose three times more from tax evasion than they receive in aid.

Following the attack in Algeria, the speech recognised that part of the struggle against such terrorists must lie in dealing with the underlying grievances that cause terrorism. That includes hopelessness and grinding poverty. However, there is a long way between understanding the links between these issues and effective action.

If the UK hopes to provide global leadership on fair taxation, it needs to put its own house in order. Despite much brave rhetoric on this subject from Coalition ministers, major companies that do not pay their share of tax still enjoy secret negotiations with HMRC not available to ordinary taxpayers and are not obliged to disclose how much corporation tax they pay. Labour's Ed Miliband has pledged to change that. Why does Mr Cameron not do it first? After all, as he says himself, being in favour or fair tax is not anti-business. Every struggling book and coffee shop in Britain must want the same thing. And if Mr Cameron is serious about confronting corrupt Government officials and dodgy corporations in poor countries, he could start by closing down the tax havens, like the Channel Islands, where they hide their money. Fair taxation is not merely an ethical and moral issue.

Grinding poverty robs the developing world of billions in lost productivity. A less unequal world would be one with millions more consumers to buy our goods and services. Tax cheats undermine the integrity of tax systems because they prompt this question: why should the rest of us play by the rules they ignore? David Cameron clearly understands these issues but does he have the stomach for permanent tax reform?

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