Why Britain's biggest businesses are addicted to tax havens
The government is making it easier for multinationals to dodge taxes in developing countries.
By Martin Hearson Published 11 October 2011 18:58
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.

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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11 comments
I tried to explain this on the earlier posting, but I will do it again here.
The fact that something is located in a tax haven doesn't necessarily mean taxes are being dodged. For example, investment trusts and funds are often set up in tax havens. All the income and gains generated by the funds are still taxable for the fund investors, so no tax has been avoided. But by locating the funds in tax havens they avoid the headache of having the income taxed at source and needing tax treaties with each and every country for which the investors have citizenships.
So it is expected that large financial institutions will have huge numbers of offshore entities.
Jersey and the Cayman Islands and 4 others are British Territories.
I may be thick, but where's the logic in the British Govt wingeing about Tax Havens when they're part of the British Empire, and we have the power to do something about these shysters.
This includes Delaware, Netherlands and Ireland as tax havens. Delaware has some secrecy issues but isn't a full fledged tax haven and also is entitled as a state to tax how it wishes. Netherlands and Ireland aren't by any means tax havens - they just tax at lower levels in certain respects than the UK as they are entitled to under EU law as independent countries. Companies are allowed to move parts of their business to other parts of the EU from Britain and this will not change unless European treaties are fundamentally amended or repealed (so never).
So that leaves the rest. Yes, the off-shore jurisdictions should be cracked down on in so far as possible. But clearly the issue is more complicated than "evil tax avoidance" if the authors are complaining about Ireland.
If I could pay lower taxes then I would. How evil is that?
"As far as I knew..."
If you're genuinely interested in 'knowing' read Treasure Islands by Nicholas Shaxson.
What the British Govt needs to do is levy a special tax on these Territories call it a Defence Tax or Protection Tax, so that the Territories are forced to raise their own tax to pay for the special tax. That way we get some of the avoidnce money back and shut dpown these hole in the wall gangsters.
We also need to nail the tax evaders on the mainland as well.
What any government needs to do is herd all it's so-called consultations together as a bunch of going concerns and put somebody independent and capable in charge, please.
These officials could operate from the local to the national level so that ordinary members of the public need never again become baffled by how consultations are supposed to work.
The last government was quite good at making sure everyone who may be interested or concerned about things up for consultation could at least on the face of it - find them and get involved directly, regardless of the type of IT set up they were using.
Surely the City, Wall Street etc are tax havens par excellence! Tax funds are readily available. Bonuses even more so. The overseas tax havens are no more than distractions
In the City no banker of financial speculator has darkened the door of any of HM's penal institutions.
At least some of Wall Street's perps have been sentenced to eternal life behind bars.
Osborne is the banking industries messenger and you cannot expect the bankers' placeman, creature, what-have-you, to complain about its shenanigans.
It's not out there - it's here!
Debtors
The answer to the question in the headline is quite clear. That's why there are protesters.
I saw article on this in the Independent today, although not highlighted here, it shows the Netherlands is the second biggest tax haven in the world, as far as I knew our Dutch brothers weren't running a tax haven, surely this research is totally flawed and exaggerated.
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