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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How to think about the EU result if you voted Remain

A belief in democracy means accepting the crowd is wiser than you are as an individual. 

I voted Remain, I feel sick about this result and its implications for what’s to come. But I’m a believer in democracy. This post is about how to reconcile those two things (it’s a bit unstructured because I’m working it out as I go, and I’m not sure I agree with all of it).

Democracy isn’t just fairer than other systems of governance, it’s smarter. It leads to better decisions and better outcomes, on average and over the long run, than countries that are run by autocrats or councils of wise men with jobs for life. It is simply the best way we have yet devised of solving complex problems involving many people. On that topic, if you’re not averse to some rather dense and technical prose, read this post or seek out this book. But the central argument is that democracy is the best way of harnessing ‘cognitive diversity’ — bringing to bear many different perspectives on a problem, each of which are very partial in themselves, but add up to something more than any one wise person.

I don’t think you can truly be a believer in democracy unless you accept that the people, collectively, are smarter than you are. That’s hard. It’s easy to say you believe in the popular will, right up until the popular will does something REALLY STUPID. The hard thing is not just to ‘accept the result’ but to accept that the majority who voted for that result know or understand something better than you. But they do. You are just one person, after all, and try as you might to expand your perspective with reading (and some try harder than others) you can’t see everything. So if a vote goes against you, you need to reflect on the possibility you got it wrong in some way. If I look at the results of past general elections and referendums, for instance, I now see they were all pretty much the right calls, including those where I voted the other way.

One way to think about the vote is that it has forced a slightly more equitable distribution of anxiety and alienation upon the country. After Thursday, I feel more insecure about my future, and that of my family. I also feel like a foreigner in my own country — that there’s this whole massive swathe of people out there who don’t think like me at all and probably don’t like me. I feel like a big decision about my life has been imposed on me by nameless people out there. But of course, this is exactly how many of those very people have been feeling for years, and at a much higher level of intensity. Democracy forces us to try on each other’s clothes. I could have carried on quite happily ignoring the unhappiness of much of the country but I can’t ignore this.

I’m seeing a lot of people on Twitter and in the press bemoaning how ill-informed people were, talking about a ‘post-factual democracy’. Well, maybe, though I think that requires further investigation - democracy has always been a dirty dishonest business. But surely the great thing about Thursday that so many people voted — including many, many people who might have felt disenfranchised from a system that hasn’t been serving them well. I’m not sure you’re truly a democrat if you don’t take at least a tiny bit of delight in seeing people so far from the centres of power tipping the polity upside down and giving it a shake. Would it have been better or worse for the country if Remain had won because only informed middle-class people voted? It might have felt better for people like me, it might actually have been better, economically, for everyone. But it would have indicated a deeper rot in our democracy than do the problems with our national information environment (which I accept are real).

I’m not quite saying ‘the people are always right’ — at least, I don’t think it was wrong to vote to stay in the EU. I still believe we should have Remained and I’m worried about what we’ve got ourselves into by getting out. But I am saying they may have been right to use this opportunity — the only one they were given — to send an unignorable signal to the powers-that-be that things aren’t working. You might say general elections are the place for that, but our particular system isn’t suited to change things on which there is a broad consensus between the two main parties.

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.