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.

A

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.

GETTY
Show Hide image

The NS Podcast #215: Election Special

The New Statesman podcast.

Join us for the New Statesman on-tour election special! As the polling day approaches, our team of politics writers regale Stephen Bush with news of their travels around the country. From Dover to Derby North, and from St Ives to Sheffield Hallam, via Birmingham, Belfast and Vauxhall - listen in for the interviews and insights near you.

 

Quotes of the Week:

Anoosh Chakelian on Nick Clegg in Sheffield Hallam: "Alot of people I spoke to were saying, 'Well, he went into coalition and he broke some promises, but he's been punished enough.'"

 

Caroline Crampton on Dover: "I found a lot of people who are not voting at all, or are voting for UKIP, or have voted for UKIP and are now going to vote Conservative."

 

Jonn Elledge on monkeying around in Hartlepool: "My understanding is that [the monkey mascot] never expected to win. I think he ran as a novelty candidate and then found himself mayor and ran Hartlepool for ten years."

You can subscribe to the podcast through iTunes here or with this RSS feed: http://rss.acast.com/newstatesman, or listen using the player below.

Want to give us feedback on our podcast, or have an idea for something we should cover?

Visit newstatesman.com/podcast for more details and how to contact us.

0800 7318496