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The Panama Papers: Five Ways for David Cameron to Tackle UK Tax Havens

06/04/2016 17:35 | Updated 06 April 2016

The Panama Papers have rocked the world. Yet while the head offices of the law firm at the heart of the leak are far away in tropical Panama - some of the solutions to this scandal lie closer to home.

The Panama Papers show that British tax havens - some of the Overseas Territories and Crown Dependencies - played a crucial role in the scandal, with more than half of the companies involved in the leak being registered in UK-linked tax havens, such as the British Virgin Islands.

Around the world money is disappearing offshore, often out of the reach of tax collectors. It has been revealed how companies operating in poor African countries like Uganda, Sierra Leone and Guinea have used tax havens in their complex financial dealings. 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.

Next month the UK will host a special tax and anti-corruption summit in London. Here are five things the Prime Minister could do to clean up UK tax havens:

1. Reveal who owns companies in UK tax havens

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. David Cameron is already doing this in the UK. He must now push the UK's tax havens to do the same.

2. Make companies publish their tax payments

Multinational companies don't report figures for how much money they make and tax they pay in different countries. David Cameron should act on the Government's pledge to make UK companies publish the taxes and profits they register in every country they operate, including the UK's tax havens. This would make tax far more transparent and allow the public to scrutinise the tax affairs of companies.

3. 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. They make it possible for multinational companies to shift money out of developing countries to the UK while paying little or no tax. Those treaties should be reviewed to make sure UK multinationals pay their fair share of tax around the world, especially in the world's poorest countries where tax revenues are so urgently needed.

4. Strengthen anti tax haven rules

The UK's anti tax haven rules (Controlled Foreign Company 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.

5. Champion reform of global tax rules

The international tax system is broken. Corporate tax dodging is rife. Tax havens and tax loopholes are commonplace. Developing countries alone are estimated to lose US$200 billion a year to corporate tax avoidance. Changes to the UK's tax system can make a big difference, but ultimately global tax rules must be reformed to lift the veil of secrecy and make tax fair, everywhere.

People are justifiably angry about the rottenness of the global tax system, which enables corporate tax avoidance on an industrial scale.

In response to huge public pressure, David Cameron made bold promises at the G8 in 2013 to tackle tax dodging and tackle the UK's own tax havens. He now has a golden opportunity to deliver on those promises.

David Cameron has a golden 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.

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