THE BLOG

The UK Must Not Backtrack On Tax Transparency

21/02/2017 16:40 GMT | Updated 21/02/2017 16:40 GMT
Christian Wheatley via Getty Images

The British Government currently leads the world on tax and transparency. We were the first major country to introduce a public register of who owns what companies registered on our shores.

But for the past three years, Ministers have been asking the UK's Overseas Territories and Crown Dependencies to adopt the same transparency as the UK. These UK tax havens are places like the British Virgin Islands, Cayman Islands and Bermuda. The British Virgin Islands was the most utilized tax haven named in the Panama Papers, with over half of the corporate entities named registered there.

But now, ahead of a crunch vote in the House of Commons, it looks worryingly like the Government has already given up on getting British tax havens to open up, with ministers now suggesting that the Overseas Territories will now only be expected to adopt public registers when the rest of the world does. With President Trump in the White House that looks increasingly far away.

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(IMAGE: Campaigners outside the Foreign Office highlight the secrecy of Overseas Territories)

The Government recently published the Criminal Finances Bill to try and tackle corruption, yet shockingly the bill doesn't even mention the UK's tax havens. MPs this week will be picking up the fight in the context of this climb down. Dame Margaret Hodge MP, as Chair of the cross-party Group on Responsible Tax in Parliament, has tabled an amendment to the Bill to force the UK's Overseas Territories to introduce public registers of beneficial ownership. This would disclose who owns the anonymous companies they host, shining a light on the huge wealth secretly hidden offshore.

When the Panama Papers scandal hit the news in April 2016 the public were rightfully outraged by how large corporations and private individuals could hide their business dealings through a series of shady but entirely legal off-shore processes to avoid paying tax. Polls consistently show support from two-thirds of voters across the political spectrum for tougher action.

This public mood was not lost on Theresa May. Just two days before she became Prime Minister in July last year, she gave a wide-ranging speech in Birmingham where she set out her vision for the country.

In it she said: "Tax is the price we pay for living in a civilised society. No individual and no business, however rich, has succeeded all on their own...It doesn't matter to me whether you're Amazon, Google or Starbucks, you have a duty to put something back. So as Prime Minister, I will crack down on individual and corporate tax avoidance and evasion."

She went on to say similar things in her first speech as Prime Minister on the steps of Downing Street two days later, and then later in July media reports revealed she had ordered a crackdown on companies' use of offshore tax havens. For those of us who have been working to get transparency in the UK's tax havens for some time, this was music to our ears.

In the secretive financial jurisdictions of the British Overseas Territories, it is easy to set up a company or a bank account, and members of the public will have no idea which company you own. There are 15 companies for every person in the British Virgin Islands, compared to around half a company per person in the UK. And companies in the British Virgin Islands are 11 times more likely to be involved in grand corruption than a US company.

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This is surely not what Theresa May had in mind when she made those speeches. So why the change of tune?

The widely-supported Hodge Amendment is a cross-party attempt to rectify this, with signatories from MPs right across the political spectrum. From the co-leader of the Greens, to the Westminster leader of the DUP, and including all strands of opinion within the Opposition Labour Party. This amendment is a plea to the Government to lead on transparency once again rather than resorting to simply following the stationary herd.

Tax avoidance is a global problem and we one we should all feel outrage about. We know that this murky world costs developing countries hugely too. The UN Conference on Trade and Development said that tax havens cost developing countries at least $100 billion per year, but it is probably much more than this. Despite what you might hear in the press about aid, developing countries lose more to tax avoidance than they gain in aid. Africa is a net creditor to the world.

And since the UK opened a public register of who owns what companies operating in Britain, other nations countries including Nigeria, South Africa, Kenya and Afghanistan are now considering following suit. Surely that is global leadership to be proud of not something to back away from?

Ministers have pledged a post-Brexit 'Global Britain', open for business and continuing to lead the world. Surely this new Britain could and should be a world leader on fighting corruption and increasing transparency?

We want to see a Britain that is a beacon of light allaying fears of a new world order, which threatens the opposite. A big thumbs-up to tax transparency would be a very good start.