The International Development Committee has urged the UK government to do all it can to help developing countries build an effecient tax system to end their overreliance on foreign aid.

The cross-party group of MPs sitting on the committee recommends the government introduces legislation similar to elements of the US Foreign Account Tax Compliance Act (FATCA), which requires tax authorities to automatically exchange information relating to UK citizens or corporations.

It urges the government to use its influence - via the OECD Tax and Development Task Force - to persuade other governments to follow suit.

The committee said it was a matter of urgency that the government conduct an analysis of the likely financial impact of the revised Controlled Foreign Companies (CFC) rules on developing countries. Depending on the results, the government should then seriously consider whether to drop its proposals.

It also called on the government to designate a DFID ministerial responsibility for the development impact of tax and fiscal policy. In addition, it said that there should be an administrative or legislative requirement for the government to assess new primary and secondary UK tax legislation against its likely impact on poverty reduction and revenue-raising in developing countries, and to publish that assessment alongside the draft legislation.

IDC chairman, Sir Malcolm Bruce said: 'The aim of development work is to enable developing countries to escape from over-reliance on aid. Supporting revenue authorities is one of the best ways of doing this: it represents excellent value for money, both for the countries concerned and for UK taxpayers. That is why we are urging the government to do more.'

Its report Tax in Developing Countries: Increasing Resources for Development also calls on the government to urgently analyse the impact of its new tax rules on developing countries.

The Committee said it had received evidence which argued that the government should require UK-owned companies to report their financial information on a country-by-country basis, instead of on an aggregate model. While the government is reluctant to act unilaterally, the committee's MPs are urging them to go it alone and set a positive precedent to the world.