Why Britain's biggest businesses are addicted to tax havens

The government is making it easier for multinationals to dodge taxes in developing countries.

What's a billion pounds to the government these days? Well, it's the amount that George Osborne spent slashing corporation tax from 28 per cent to 25 per cent over two years. But fewer people seem to have noticed that plans put out for consultation by the Treasury recently will give another £840m specifically to British multinational companies who use tax havens. Unmentioned in the government's consultation document is that these reforms will also make it much easier for British multinationals to use tax havens to dodge taxes in developing countries.

Research published by ActionAid today shows just how big this giveaway is likely to be. For the first time, we've been able to show the massive extent of tax haven use throughout the FTSE 100. 98 of the companies are using tax havens, where you'll find a whopping 38 per cent of all of their overseas companies located.

Our high street banks are the heaviest users with 1,649 tax haven companies shared between Barclays, HSBC, RBS and Lloyds. Barclays has 174 companies registered in the Cayman Islands alone.

Our research also raises real questions about the impact on developing countries, which lose three times more to tax havens than they receive in aid each year. The biggest ten tax haven users have a total of 3833 companies between them in tax havens (see chart), but they also have 1951 companies in developing countries. If we want these countries to become independent of development aid, as well as to end poverty, they need much more tax revenue to pay for public services.

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This all seems a little inconsistent. First, there is Britain's commitment as part of the G20 (albeit under the Brown government) to "take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems." Tax havens will be on the agenda again at the G20 summit in Cannes next month, and it's unlikely that Presidents Sarkozy or Obama, both facing election next year, will be keen to give up the fight they championed in 2009.

Second, there's the current government's commitments: Vince Cable has said that "much of the shadow banking sector, a major contributor to the economic crisis, was only possible because of tax haven secrecy," while George Osborne has promised to "target tax evasion and off-shore tax havens.Everyone must pay their fair share."

Third, there's the government's development agenda. David Cameron made "effective tax systems" a part of his vision for Africa earlier this year, and International Development Secretary Andrew Mitchell told an audience of campaigners that "everyone should pay their taxes due...we champion transparency."

The government's coalition agreement commits to "deliver value for money for British taxpayers and to maximise the impact of our aid budget," and "make every effort to tackle tax avoidance." So our new research not only raises big questions for the FTSE100, it also demonstrates the need for more coherence in government policy. Making it easier for British multinationals to dodge taxes in developing countries is a false economy for British taxpayers, because it takes money away from the very same governments that we are supporting through our overseas aid.

Asha Tharoor is the senior media officer of ActionAid.

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Labour tensions over pro-EU campaign grow

Andy Burnham warned Alan Johnson of danger of appearing part of the "establishment case". 

Compared to the Conservatives, Labour is remarkably united over the EU, with the entire shadow cabinet and 214 of its 231 MPs backing the party's In campaign. Only a handful have joined the rival Labour Leave group, though sources are confident that more, potentially including shadow ministers, will do so when David Cameron's renegotiation concludes. 

But there are notable tensions within the In campaign. At this week's shadow cabinet meeting, which received a presentation from pro-EU head Alan Johnson, Andy Burnham warned of electoral damage to Labour if it was part of the "establishment case" for staying in. Burnham emphasised the need for the party to differentiate itself from Cameron and business leaders, I'm told. Angela Eagle also spoke of her concern at the number of eurosceptic Labour supporters. 

Just as the SNP surged following the Scottish independence referendum, so some shadow cabinet members believe Ukip could do so after the EU vote. One told me of his fear that those Labour supporters who voted Out would make "the transition" to voting for Farage's party. Ukip finished second in 44 of Labour's seats at the last election and helped the Tories win marginals off the opposition. 

Among Labour's pro-Europeans, the fear is that the party's campaign will be "half-hearted". Jeremy Corbyn, a long-standing eurosceptic (who some believe would have backed withdrawal had he not become leader), struggles to express enthusiasm for remaining In. Speaking to the New Statesman, former shadow Europe minister Emma Reynolds warned: 

"The British public will expect the Labour Party to have a clear position. And we do have a clear position and that's that we're going to campaign to stay in the EU. Trying to fudge the issue or hedge your bets is not going to go down well with the British public. Of course we need to talk to people about all aspects of the EU, and that will involve talking to people about immigration, but there isn't a 'maybe' on the ballot paper it's a binary choice between remain and leave. We have to be clear with people where we are because they won't thank us for being wishy-washy."

Labour's Brexiters draw comfort from the dearth of MPs campaigning for EU membership. Kate Hoey told me: "I have been genuinely surprised how few supposedly 'pro-EU' Labour MPs have been prepared to come out and speak publicly of their support for staying in. They know, as those of us campaigning on the Leave side know, that thousands and thousands of Labour supporters, all over the country, want to come out and they are not going to receive a great reception on the doostep". 

George Eaton is political editor of the New Statesman.