Around the world money is disappearing offshore, usually out of the reach of tax collectors. The Panama Papers have revealed how companies around the world, including ones operating in poor African countries like Uganda, Sierra Leone and Guinea are using tax havens. It is often women and girls living in poverty who are the hardest hit when key public services like schools and hospitals are starved of tax funding. It’s time to make tax fair for the world’s poorest people.
ActionAid's pop up tax haven, the Isle of Shady on the South Bank in London, raised awareness of UK tax havens back in 2013.
The UK plays a central role in the global tax system - so the UK government can play a crucial role in fixing it. British tax havens like the British Virgin Islands are being used by big companies to avoid taxes in some of the world’s poorest countries.
Here are five things the Prime Minister could do to clean up UK tax havens:
1. Reveal who owns companies in UK tax havens
Over 113,000 companies linked to the Panama Papers are registered in the British Virgin Islands, a UK tax haven. These “shell companies” can be used to avoid tax by hiding the identities of the companies or individuals that own them. The Prime Minister should demand that all the UK’s tax havens create public registers of the true owners of these companies. This would help tax authorities around the world make sure the owners are paying their fair share of tax.
2. Make tax fair for the world’s poorest people
The international tax system is broken. Corporate tax dodging is rife. Developing countries are estimated to lose US$200 billion a year to corporate tax avoidance, leaving them without the resources they need to find a sustainable route out of poverty. Global tax rules must be changed to lift the veil of secrecy and make tax fair, everywhere.
3. Be transparent on tax
At the moment we don’t even know how much tax companies are paying around the world. The Government should act on its pledge to make UK companies publish the amount of tax they pay in every country they operate in, including tax havens. This would make tax far more transparent and allow the public to see where companies are (and are not) paying tax.
4. Fix tax treaties
As well as a network of tax havens,the UK has one of the most unfair and restrictive tax treaty networks in the world. These networks of tax treaties make it possible for multinational companies to shift money out of developing countries and into the UK while paying little or no tax. These treaties should be reviewed to make sure they do not tie the hands of poor countries.
5. Strengthen anti tax haven rules
The UK’s rules to deter UK multinationals from using tax havens aren’t fit for purpose. They need to be beefed up to deter companies from using of tax havens.
The global tax system is broken. Tax havens are at its heart, enabling corporate tax avoidance on an industrial scale.
In May the UK will host a special tax and anti-corruption summit in London. David Cameron has a golden opportunity to tackle tax secrecy, increase transparency of the UK’s tax havens and deliver a fair deal for some of the poorest people in the world.
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Photo credits: ActionAid