Government aid programme attacked over value for money in overseas schemes

The Government's aid programme has been criticised by an independent review after it was found to have short-changed British taxpayers in some overseas projects.

HMRC has been rebuked for not achieving good value for money in its early efforts to help other countries improve their tax collection.

The Department for International Development (DFID) was given an "amber-red" rating by the Independent Commission for Aid Impact's (ICAI) review for its work in helping to crack down on tax avoidance and evasion globally.

In one case highlighted, nearly £1.2 million was spent on training 15 new HMRC UK tax experts so staff could carry training in developing countries.

But just half its planned advisers were deployed.

The report also found that DFID should have done more to consider developing countries' needs and priorities in tackling tax avoidance, and have kept closer tabs on the impact of its work.

The report, UK aid's contribution to tackling tax avoidance and evasion, states: "HMRC's early use of funds was not good value for money."

And it warns that close attention will have to be paid to how other government departments spend the aid budget to ensure it is value for money.

It states: "In the first year of the Capacity Building Unit, £1.17m was spent on training HMRC tax experts for domestic roles in order to release existing staff for deployment abroad. HMRC has never achieved more than half of its planned deployment.

"This highlights a key value for money risk as departments take on new aid delivery roles. It will take time for them to establish the systems, capacity and programmes needed to spend aid effectively in new country contexts.

"There are also value for money concerns about short-term technical assistance. In our survey and country case studies, national tax authority officials expressed doubts that short-term, one-off missions added much value."

The report found that while DFID had achieved "some positive early results" it had adopted a top down approach and often failed to consult properly with the countries it was working with.

Richard Gledhill, lead ICAI commissioner for the review, said: "DFID, and the UK Government, are committed to driving progress on international tax policy to address global challenges and reduce global poverty.

"But, despite these ambitions, DFID has too often supported a top down approach, which has failed to give developing countries a voice when crucial decisions are being taken."

He warned that some of the new international tax standards drawn up will be difficult for developing countries to actually benefit from.

Charlie Matthews, ActionAid's head of advocacy, said: "This report confirms that UK aid's approach to tackling tax avoidance is incoherent, ineffective and is in danger of failing to deliver for the world's poorest people."

She added: "Instead of standing by as the UK pushes tax reforms designed to meet the needs of rich countries, DFID needs to listen to poorer countries and ensure efforts to reform the global tax system are informed by their needs.

"This report should kick-start a cross-government approach to tackling global poverty and tax avoidance."

A DFID spokeswoman said: "No aid money has been spent on training HMRC tax advisers to work on UK cases.

"The HMRC Capacity Building Unit makes use of existing UK tax advisers to share key learnings on tax evasion and is already providing technical support across nine of the world's poorest countries.

"Providing this advice and maximising tax revenues not only helps alleviate poverty, but also builds robust institutions and tax systems so developing countries can stand on their own two feet."

The DFID spokeswoman added: "Through its presidency of the G8 and through the G20, the UK has pushed forwards an international agenda for tackling global tax evasion.

"As ICAI rightly recognises, DFID has helped developing countries benefit from the new international tax standards and this has been underpinned by effective cross-government collaboration.

"The UK has a strong record of supporting and mentoring developing countries in this field and will continue to do so."