In April 2016 the Panama Papers broke open the secret world of tax havens. The leak of 11.5 million files from the law firm Mossack Fonseca gave the world a look into nearly fifty years of the relationship between tax, tax dodging and tropical tax havens. That scandal has been followed by controversy over Apple’s tiny tax bill and a leak of more than a million tax haven files from the Bahamas. UK Prime Minister Theresa May has rightly called for a crackdown on tax dodging. Ahead of the Conservative Party Conference we look at what she can do to deliver on that call.
Around the world money is disappearing into loopholes, offshore schemes and corporate coffers. The poorest women and children suffer when schools and hospitals are starved of funding by corporate tax avoidance, estimated to cost developing countries a staggering US$200 billion a year.
Theresa May has promised to take action on tax dodging. Here are five things the new Prime Minister could do to make it a fair tax system a reality:
1. Stop cutting tax for big companies
The UK corporate tax rate was 28% in 2009, but is set to fall to just 17% by 2020. This is part of a damaging trend which has seen corporate tax rates fall across the world, pressuring poor countries into offering ever lower rates.
The Government should stop this shortsighted race to the bottom before it’s too late.
2. Clean up UK tax havens
The UK has its very own network of tax havens - sunny islands like the Caymans, British Virgin Islands and Bermuda. A staggering 113,000 companies linked to the Panama Papers are registered in the British Virgin Islands alone.
The Prime Minister should pledge to end tax haven secrecy and commit to ending the age of the British tax haven.
3. Fix unfair tax treaties
As well as tax havens, the UK has one of the most unfair and restrictive network of tax treaties in the world. They make it possible for multinational companies to shift money from poor countries to the UK while paying minimal tax. That must change.
Those treaties should be rewritten to make sure UK multinationals pay their fair share of tax around the world.
4. Make companies publish what they pay
Multinationals do not publicly declare where they do business or the tax they pay. Theresa May’s government now has the power to boost transparency and make UK companies publish the taxes they pay country by country, including in the UK’s tax havens.
The Prime Minister should implement this so that a light is shone on companies tax planning.
5. Fight for fairer global tax rules
Corporate tax dodging is the new normal. Money is shunted around an electronic web of tax havens and loopholes. The system is broken. The poorest countries are shut out of reform efforts and left playing catch up. The UK could help to change that. Following the vote to leave the European Union, and as the UK rethinks its global role, there is an opportunity to show that we are still a global champion for fair play.
The Prime Minister should seize the opportunity to work towards a fairer tax system that allows poor countries to stand on their own two feet.
Corporate tax dodging is the new normal. Money is shunted around an electronic web of tax havens and loopholes. The system is broken.
Time for Theresa May to make tax fair
This weekend the Conservative Party Conference begins in Birmingham - Theresa May’s first since moving to No.10. When she takes to the stage to set out her vision for Britain she should make the case for UK to be a world leader on making tax fair. Fighting for fairness at home and abroad.
She has a one-off opportunity to clean up UK tax havens, reform global tax rules and deliver a fair deal for some of the poorest people in the world. Let’s hope she takes it.
If you'd like to support us in our campaign to make tax deals fairer for developing countries, please sign our petition now. Take action to help make tax fair
Policy Exchange/Creative Commons