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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Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.