New poll: MPs back crackdown on UK overseas tax havens

A large majority of MPs believe that UK companies with subsidiaries in tax havens should be required to explain what those subsidiaries are used for (72% of MPs agree). 

56% of MPs backed the idea that, before the UK leaves the EU, the Government should set a date by which it will require UK-linked tax havens such as the British Virgin Islands and Bermuda to publicly reveal the real owners of the secretive shell companies they host. 

A large majority (74%) also backed a call for the Prime Minister to require all multinational companies report how much tax they pay in every country where they do business, including tax havens. The Government already has the power to do this thanks to a recent change to the law. 

ActionAid published the poll – conducted by Dods Parliamentary Communications — as part of the launch of its 2017 Make Tax Fair’ campaign.

The campaign is calling on Theresa May to deliver on her promise to curb the use of tax havens and rule out the UK becoming a tax haven.

The Overseas Territories Joint Ministerial Council will take place on Wednesday 8 February 2017.

 

Extra $700 billion channelled through tax havens in just two years

ActionAid analysis of new data from the International Monetary Fund has revealed that more investment is flowing through tax havens, despite years of politicians claiming they are cracking down on tax dodging.

$12.5 trillion of foreign direct investment was owned via tax havens in 2015. This compares to $11.8 trillion in 2013 — an increase of $700 billion. 

The tax havens channelling the most corporate investment in 2015 included UK overseas territories such as the British Virgin Islands ($1.1 Trillion), Bermuda ($710 billion) and the Cayman islands ($568 billion).

Poorer countries are some of those most exposed to tax havens. ActionAid estimates that in 2015 $132 billion of corporate investment in India was routed via tax havens, $106 billion in Indonesia and $35 billion in Nigeria. Nigeria has one of the highest child mortality rates in the world with more than one in ten children dying before the age of 5.

The increase is notable because it was in 2013 that G8 leaders gathered in the UK to commit to tackling tax avoidance. David Cameron, the then UK Prime Minister, promised there would be “nowhere to hide” for tax avoiders. The current Prime Minister, Theresa May, echoed that statement at the 2017 Davos summit when she called for companies to pay their “fair share of tax”.

Theresa May has pledged to crack down on tax havens and tackle corporate tax dodging. ActionAid is calling on the Prime Minister to first show leadership at home by rejecting plans to cut corporation tax and turn the UK into a tax haven.

ActionAid is also calling on the Prime Minister to show global leadership by demanding that UK-linked tax havens publicly reveal who owns the shell companies they host and by using powers introduced by Parliament to ensure that multinational companies publicly reveal the taxes they pay in every country where they operate. 

Longer term the Government should come forward with a comprehensive plan to stop the use of tax havens and end the problems they cause in developing countries, including UK-linked tax havens like the British Virgin Islands.

 

Ojobo Atuluku, ActionAid Nigeria Country Director, said:

“Trillions upon trillions of pounds are being funnelled via tax havens, much of it through UK-linked tax havens like Bermuda and the British Virgin Islands. This is fuelling corporate tax avoidance on a staggering scale. 

“ActionAid is launching our campaign for tax justice because poorer countries are the biggest losers in this global game of smoke and mirrors, with women and girls paying the price as schools and hospitals are starved of funding. 

“Theresa May must rule out turning the UK into a tax haven. The Prime Minister must honour her pledge to crackdown on tax havens, end corporate tax dodging and ensure big companies pay their fair share of tax at home and in poorer countries. Tackling UK-linked tax havens like the British Virgin Islands would be a good place to start.”

 

ActionAid’s Make Tax Fair campaign is calling for:

• No further cuts to UK corporation tax: there have been suggestions the UK could turn itself into a tax haven after Brexit, which the Government have not ruled out. ActionAid is calling on the Government to make no further cuts to UK corporation tax beyond commitments already made.
• Public country-by-country reporting: all multinational companies operating in the UK should be required to publish their turnover, profits and tax payments in every jurisdiction around the world where they do business — including tax havens.
• UK-linked tax havens to introduce public registers of beneficial ownership: tax havens such as Bermuda, the Cayman Islands and the British Virgin Islands should publicly reveal the true owners of the shell companies they host. These companies can be used to avoid tax by hiding the identity of people holding money in tax havens. 
• A plan for change: the UK Government should come forward with a plan to end the use of tax havens all together.

Ends

Notes to editors:

• The Overseas Territories Joint Ministerial Council will take place on Wednesday 8 February 2017 — http://www.royalgazette.com/news/article/20170206/premier-overseas-for-brexit-meetings
• The data used for this new analysis is The IMF’s Coordinated Direct Investment Survey (CDIS) —  a worldwide survey of foreign direct investment positions
• Foreign direct investment (FDI) is cross border investment where a resident in one economy has control or a significant degree of influence on the management of an enterprise resident in another economy — https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr10510
• A foreign direct investment position is the cumulative value of net inward direct investment made by non-resident investors in the reporting economy — https://datahelpdesk.worldbank.org/knowledgebase/articles/114954-what-is-the-difference-between-foreign-direct-inve
• Tax havens:  Tax havens offer low or no tax on corporate profits, so large volumes of investment being channeled into a country via a tax haven are an indicator that companies may be avoiding tax in that country. Some tax havens also offer secrecy to investors, which can be used to hide tax avoidance, tax fraud or other financial crimes. Tax havens can facilitate corporate tax avoidance on an industrial scale. It is possible for companies to avoid tax by shifting profits from countries where they are doing business, like Nigeria, to a tax haven with a tax rate close to zero. It is estimated that developing countries lose $200 billion per year to corporate tax avoidance, much of it facilitated by tax havens. Women and girls living in poverty pay the price as key public services like schools and hospitals are starved of funding.
• For the purposes of defining a tax haven ActionAid’s analysis is based on the same list of 51 countries and territories on which our 2011 research was based.: ActionAid. Addicted to Tax Havens. The Secret Life of the FTSE-100. October 2011. This research used companies’ AR01 filings to Companies House in 2010 and a list of tax havens comprising Andorra, Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Bahrain, Barbados, Belize, Bermuda, the British Virgin Islands and Cayman Islands, the Cook Islands, Costa Rica, Cyprus, Dominica, Gibraltar, Grenada, Guernsey, Hong Kong, Ireland, the Isle of Man, Jersey, Jordan, Latvia, Lebanon, Liberia, Liechtenstein, Luxembourg, Macao, the Maldives, Malta, the Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, the Netherlands, the Netherlands Antilles, Niue, Panama,  Samoa, San Marino, the Seychelles, Singapore, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines,  Switzerland, the Turks and Caicos, the US Virgin Islands and Vanuatu. This list was drawn from: Government Accountability Office of the United States Congress. International Taxation. Large US Corporations and Federal Contractors with Subsidiaries Listed as Tax Havens or Financial Privacy Jurisdictions. 2008. Pages 12-13. We added the Netherlands and Delaware, which are important tax havens not included in the GAO’s list. Our list does not include all jurisdictions in the world which offer low or no taxation to corporations. While some of these jurisdictions are known to be very important to multinational tax avoidance, others appear to be marginal or irrelevant.