UK govnt refuses to enforce tax haven transparency law | ActionAid UK

UK govnt refuses to enforce tax haven transparency law

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One in ten British-registered FTSE 100 multinationals failed to disclose tax haven companies despite UK promising crackdown to help developing countries fight poverty.

As executives from Google give evidence on tax avoidance today, ActionAid can reveal that the UK company regulator is explicitly refusing to enforce UK law requiring multinationals to disclose their operations around the world, including in tax havens, despite growing international pressure for tough action against secretive tax havens to help unlock the resources needed to tackle global poverty.
As a result, the public filings of one in ten of the UK’s largest listed multinationals – with developing country operations from Zambia to India — have in the last year failed to disclose nearly 150 subsidiaries in tax havens including the British Virgin Islands, Switzerland, Bermuda, Mauritius and Luxembourg. These subsidiaries have finally been disclosed after official complaints by ActionAid to the UK company regulator.

UK-registered companies are legally required to annually disclose their ownership of subsidiaries around the world. This is often the only public record of the existence or real ownership of their companies in opaque tax havens. Information about multinationals’ tax haven companies is vital for developing country tax departments and other authorities to scrutinise large companies’ affairs.
Mike Lewis, ActionAid’s tax policy advisor, examined the corporate disclosures of every UK-registered FTSE100 parent company to the UK company registry, Companies House:

“Tax havens are one of the biggest hidden obstacles in the fight against poverty. Poor countries lose more money to tax havens than they receive in aid each year. Developing country tax authorities are often unable to scrutinise the offshore tax affairs of multinationals without adequate disclosures in the countries where they are headquartered.”
If the proportion of one in ten is typical, then several thousand UK-headed multinationals may be similarly failing to disclose their operations around the world and in tax havens.

ActionAid first revealed widespread non-disclosure of tax haven subsidiaries by large UK multinationals in 2011, following which Business Secretary Vince Cable promised an inquiry and the possibility of legal action against UK companies that fail to meet their legal obligations to report their tax haven subsidiaries.

But Companies House has now written to ActionAid that it does not intend to actively enforce this legal requirement, saying that it would be too “resource intensive” to check that all companies had submitted the required documents, and that they will only take action when individuals or organisations like ActionAid check companies’ compliance and submit complaints.
ActionAid again examined the annual returns and accounts of all the UK-registered parent companies of the FTSE100 in September 2012. We found that nine of the 89 UK-headed members of the FTSE100 had failed to disclose their full subsidiaries in their Annual Return. All have now filed updated returns with the required information, subsequent to ActionAid’s complaint.
Several companies told ActionAid that their failure to disclose was as an administrative error, and that when filing their annual returns, Companies House had not indicated that this disclosure was even required. At least six of these multinationals appears to have not made the required disclosure for several years. Three were subject to complaints to Companies House to require disclosure in 2011, yet they again did not make the required disclosure in 2012, without any action by Companies House until ActionAid again brought the breaches to its attention.
The existence of tax haven subsidiaries is not proof of tax avoidance, and ActionAid is not accusing any of these companies of tax avoidance or evasion.
Lewis added: “The prime minister has promised to tackle tax havens at this year’s G8, and the UK is responsible for one in five of these havens around the world. But the government is failing even to enforce the UK’s existing laws on corporate secrecy at home. Now it’s time for action.”
David Cameron has promised to deliver a concerted effort by G8 countries at their summit in June to lift the lid on tax haven secrecy for the benefit of developing countries’ fragile public revenues. ActionAid is calling on the UK government to ensure that the ownership of all companies and trusts in tax havens are placed on public record, and that all UK tax havens commit to sharing tax information with all countries, not just the UK, US and other wealthy countries.