Six Months On From The Panama Papers, Here's Five Ways For Theresa May To Tackle Tax Dodging

03/10/2016 17:16
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Campaigners turn London's Trafalgar Square into a tax haven

Six months ago today the Panama Papers punched a hole in tax haven secrecy. The leak of 11.5 million files from the Mossack Fonseca law firm gave an unprecedented look into the global web of tax havens and tax dodging.

A lot has happened in that time: the UK voted to leave the European Union and we have a new government. But public anger at tax dodging has continued to grow. Controversies such as Apple's tiny tax bill and a leak of a million tax haven files from the Bahamas has stoked the fire.

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.

The new UK Prime Minister Theresa May set out her stall early, promising on the steps of Downing Street that her tax policy would "prioritise not the wealthy, but you" and pledging that "we have decided to do more to stop aggressive tax avoidance and to fight corruption".

It all sounds very promising, but success will depend on how she puts her words into action. Ahead of her speech to Conservative Party Conference we look at what she can do:

1. Put an end to falling tax rates for corporations

The UK corporate tax rate was 28% in 2009. Today it stands at 20% and it 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 and making it harder for them to stand on their own two feet.

The Prime Minister should end this damaging race to the bottom.

2. Clean up UK tax havens

The Prime Minister has pledged a crackdown on tax havens. She should start with those directly linked to the UK - sunny islands like the Caymans, British Virgin Islands and Bermuda. A staggering 113,000 companies linked to the Panama Papers were registered in the British Virgin Islands alone. There are concrete actions that the UK could take today to stop this - for instance, by making sure all UK tax havens introduce public registers revealing the real owners of the countless shell companies they host.

The Prime Minister should commit to ending the age of the British tax haven.

22-year-old Chisomo Bullah is one of many activists in Malawi fighting for a fair tax treaty between the UK and Malawi.

3. Fix unfair tax treaties

The UK's role in the broken global tax system goes beyond our tax havens. The UK also has one of the most unfair and restrictive tax treaty networks in the world. These agreements make it possible for multinational companies to shift money from poor countries to the UK while paying minimal tax. This must change.

Those treaties should be rewritten to support poorer countries' efforts to collect a fair share of tax from UK multinationals.

4. Make companies publish what they pay

Multinational companies are under no obligation to publish details of the profits made and tax paid around the world. Thanks to a recent law change the government now has the power to demand this information from UK multinationals. This would be a huge boost to transparency, and would make it easier for citizens of both the UK and developing countries see where the money is going - including in UK tax havens.

The Prime Minister should use these new powers to force companies to publicly reveal the taxes they pay in each and every country where they do business.

5. Champion fairer global tax rules

The global tax system is broken. Money is being shunted around the world via a network of tax havens and loopholes. The poorest countries are the worst affected and left playing catch up. The UK could help to change that. As Britain rethinks its global role following the vote to leave the European Union, we have the opportunity to show that we are still a global champion for fair play.

The Prime Minister should champion the need for a fairer tax system that allows poor countries to stand on their own two feet.

Theresa May 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.