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Time To Tackle The UK's Treasure Islands

09/02/2017 12:50

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Tax campaigners turned London's Trafalgar Square into a tax haven in May 2016

On Wednesday the leaders of UK-linked tax havens - the so-called overseas territories - gathered in London to meet with Theresa May.

This far-flung network of tiny islands such as Bermuda, the Caymans and the British Virgin Islands are little more than specks in the ocean, yet they are helping to fuel corporate tax dodging on a truly staggering scale.

To mark the launch of our 2017 'Make Tax Fair' campaign ActionAid is releasing new research which shows that in 2015 an astonishing $12.5 trillion of foreign direct investment (FDI) was owned via tax havens - an increase of $700 billion in the space of just two years.

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

This is despite years of politicians claiming they are cracking down on tax dodging. It was 2013 when 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.

UK-linked tax havens are part of a global tax haven industry which is funnelling trillions into secretive offshore accounts - a staggering 113,000 companies linked to the Panama Papers were registered in the British Virgin Islands alone. And it is often some of the poorest people in the world who are paying the price.

ActionAid estimates that $106 billion of corporate investment in Indonesia and $35 billion in Nigeria was routed via tax havens in 2015. These countries are those who can least afford to lose tax revenue.

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. It also has the fourth highest maternal mortality rate in the world with 814 women dying for every 100,000 live births. If more money was available for maternity care lives could be saved.

The UK has shown leadership on tax transparency, and when Theresa May became Prime Minister she promised to do more to tackle tax havens. Instead she is flirting with the idea of turning the UK into a tax haven after Brexit.

Tax havens make poverty and inequality worse. 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.

The UK should be leading the charge when it comes to cleaning up the murky corners of the global economic system. We need Theresa May to show leadership.

Here are a few ideas for her to consider as she sits down with the leaders of UK-linked tax havens:

1. Rule out turning the UK into a tax haven

The UK corporate tax rate was 28% in 2009 and it is set to fall to just 17% by 2020 - it's lowest ever level. 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-linked tax havens

Anonymous shell companies set up in tax havens can be used to hide money from the tax man. Sunlight is the best disinfectant - the UK was the first country to publicly reveal company owners. The Prime Minister should now set a deadline for ensuring all UK-linked tax havens publish a register revealing the real owners of the countless shell companies they host. That way we could see who is stashing their money in offshore companies.

3. Make companies publish what they pay

At the moment multinational companies can shift money around the world under a veil of secrecy. After recently changing the law, the government now has the power to demand companies publicly reveal the tax they pay in every country where they do business. 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 into UK tax havens.

4. A plan to end the use of tax havens

Tax havens represent a huge challenge for the global economy. Their tiny tax rates and secretive tax codes have sucked in money from all over the world, at the expense of public services. I have made a few suggestions for change but it is really up to the Prime Minister and the Government to lead on an international level.

We need to help tax havens transition to a new type of economy, and put in place deterrents to stop companies shifting their profits offshore. The UK Government should come forward with a plan to end the use of tax havens all together.

Theresa May has an opportunity to clean up UK-linked tax havens, reform unfair tax rules and deliver a fair deal for some of the poorest people in the world.

Let's hope she takes it.

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