26/11/2013 07:23 GMT | Updated 26/11/2013 07:29 GMT

Rich See Paying Tax As 'Increasingly Voluntary', Warns Margaret Hodge

Ian Gavan via Getty Images
BARKING, ENGLAND - MAY 07: Margaret Hodge, Labour MP for Barking gives a television interview as votes for her Barking constituency are counted at the Goresbrook Leisure Centre on May 7, 2010 in Barking, England. After 5 weeks of campaigning, including the first ever live televised leader's debates, opinion polls suggest that the UK is facing the prospect of a hung parliament for the first time since 1974. (Photo by Ian Gavan/Getty Images)

Multinational corporations and the ultra-rich see paying tax as "increasingly voluntary", public accounts committee chair Margaret Hodge has warned.

The Labour politician launched a savage attack on David Camerons efforts to crack down on aggressive tax avoidance, saying there was a "growing gap between rhetoric and reality".

Speaking at a "Tax Justice" debate organised by various charities, Hodge said: "They [ministers] believe we should engage fully in the global race to the bottom... I now believe David Cameron doesn't mean what he says when he says multinational companies should 'wake up and smell the coffee'."

The PAC chair's attack comes after David Cameron warned corporations in January to "wake up and smell the coffee" over their duty to pay their fair share of tax, in a subtle reference the controversy sparked by coffee chain Starbucks' tax arrangements.


Hodge's attack on the Prime Minister comes after former Tory chancellor Nigel Lawson accused ministers of "prancing around" the issue.

Speaking at a Lords debate, he said: "It is a totally inequitable system. So what is the government doing? Just prancing around saying we are talking about with our opposite numbers from other OECD countries and other European countries and goodness knows what.

"They love going to these conferences and they happily make statements that they have reached a great understanding and a great agreement but the problem is just the same, it hasn’t gone away."

The Prime Minister recently announced that a UK register of the beneficial ownership of companies would be made public, lifting the "cloak of secrecy" international cash flows.

He said: "For too long a small minority have hidden their business dealings behind a complicated web of shell companies - and this cloak of secrecy has fuelled all manner of questionable practices and downright illegality."

"Illegality that is bad for the developing world - as corrupt regimes stash their money abroad under different identities. And illegality that is bad for Britain's economy too - as people evade their taxes through untraceable trails of paperwork.