‘The problem with a lot of countries is not a shortage of capitalism, it is a shortage of capital’

Sitting in his office in 10 Downing Street on Saturday, David Cameron spoke above the strains of the footguards of the Welsh and Grenadier Guards as they played their opening bars on Horse Guards Parade for the trooping of the colour, marking Queen Elizabeth's official birthday.

Northern Ireland's First Minister Peter Robinson and Deputy First Minister Martin McGuinness had been in his office on Friday before a sunny press conference in No 10's rose garden.

“They were in great form. It is amazing listening to Martin McGuinness in full flow on cutting red tape, boosting enterprise. Yes . . . he’s very passionate about the economy,” says Cameron with a chuckle and a note of slight surprise in his tone.

His mood is ebullient. Never interested in multilateral negotiations in the way of his predecessors, Tony Blair and Gordon Brown, Cameron has seemingly immersed himself in G8 since the UK took over its presidency in 2013.

Global agenda
"Hmmm, there's been a lot of prep," he muses. "I have been to one, two, three G8s", noting each on his fingers, "several G20s, more European councils than is healthy, Nato summits and the like. I think the important thing is to set the agenda. You can run with the global agenda, whatever is on the menu at the time, or you can decide to set your own."

The prime minister says he has tried to avoid being “convulsed by the paperwork”. So far, Cameron is certain he has achieved that.

However, others are more doubtful, believing that his efforts to promote “tax, transparency and trade” have fundamentally shifted the goal posts that will force multinationals to pay more in tax. “Political leadership often involves making enemies. I feel this is right, morally,” he says, shortly before meeting leaders from the crown dependencies and the UK’s overseas territories – often deemed “sunny places for shady people”.

“Do we want to have another chapter in our history of more Liberias, more Sierra Leones, more Equatorial Guineas where countries are raped of their resources, people are left poor, where the rich grow richer and corruption is rampant?” he says.

If left unfixed, the problems will sap the West's "faith in the ability of aid, development and engagement to drive progress", but Cameron points to countries such as Ghana and Senegal where lessons have been learned from the errors and sins of the past.

'Centre-right politician'
Multinationals can no longer get by with paying little or no tax. "[That is] one of the reasons why it is important that a centre-right politician who believes passionately in the capitalist system and free enterprise does this.

“I am glad that I am taking this on. If the left was driving this agenda it might turn into an anti-capitalist rant. It shouldn’t. Capitalism is good for growth and prosperity. The problem with a lot of countries is not a shortage of capitalism, it is a shortage of capital,” says Cameron.

The UK will lead by setting up a register of who really owns companies. This will be available first to revenue authorities hunting illegal tax avoidance activities, though he is prepared to make the register public if others do the same in their territories.

“I don’t believe in minimum tax rates, I think it is perfectly acceptable for countries to set low rates in order to attract business and in order to be competitive. What is not acceptable is to turn a blind eye to bad corporate practices,” says the prime minister.

He adds that tax authorities should be better able to track hidden assets, so that a tax rate set must be the tax rate paid. “You need to have exchange of tax information so that countries’ tax authorities can see how they are operating across different places.”

The Republic’s 12½ per cent corporation rate is not a problem for Cameron, partly because he is trying to do something similar in the UK by lowering its rate from 28 per cent to 20 per cent – potentially the lowest among the G8 – by the time of the next election in 2015.

“I don’t criticise the Republic of Ireland for having a low corporate tax rate. We have a low corporate tax rate in the UK, but I do believe that it is important that having set the tax rate that companies pay it.”

“There are issues about the ‘Double Irish’ and the ‘Dutch sandwich’ and all of the rest of it, but I think if people really understood how some of these work I think they would be rather disturbed.”

Varied national tax codes
The "Double Irish" with a "Dutch sandwich" technique is just one of several similar global tax avoidance schemes. Each involves arranging transactions between subsidiary firms to take advantage of the idiosyncrasies of varied national tax codes.

For the North, the G8 summit offers a global stage to display its wares to the world. "That is why I chose Northern Ireland, it was very much my decision," he says, smiling ironically, "It was very much like Yes Minister when people say, 'Yes, that's a brave decision, minister'."

Freed from the paperwork, Cameron hopes the environment in Lough Erne over the next two days will enable the G8 leaders the chance to talk “about the genuine problems, without too many officials and advisers present”.

“I want it to be that sort of summit . . . I have put a lot of work in. I went myself to the place that we are going. I wanted to see it, I wanted to walk around it, I wanted to see how it worked. I met some of the neighbours who are very excited, it is a beautiful spot. There had just been a fire, which is not a good omen,” he says, adding with a laugh, “but I am hoping that they have got rid of the traces of that. I’m hopeful, but you shouldn’t ever raise expectations about these things.”

Nevertheless, he is convinced there will be a legacy.

“I think people will look back on this and say, ‘tax, transparency and trade has an amazing ability to transform the world’s fortunes, particularly for the poorest in our world’. That is a good thing to be spending your time on.”

Turning to the music coming from Horse Guards, which is blocked from sight by the terraced seating installed for the day, he says: “Pity you can’t see out, it is a good view,” before determining that he must do something about that sock. “Let me go and put on a proper one.”