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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Ignored by the media, the Liberal Democrats are experiencing a revival

The crushed Liberals are doing particularly well in areas that voted Conservative in 2015 - and Remain in 2016. 

The Liberal Democrats had another good night last night, making big gains in by-elections. They won Adeyfield West, a seat they have never held in Dacorum, with a massive swing. They were up by close to the 20 points in the Derby seat of Allestree, beating Labour into second place. And they won a seat in the Cotswolds, which borders the vacant seat of Witney.

It’s worth noting that they also went backwards in a safe Labour ward in Blackpool and a safe Conservative seat in Northamptonshire.  But the overall pattern is clear, and it’s not merely confined to last night: the Liberal Democrats are enjoying a mini-revival, particularly in the south-east.

Of course, it doesn’t appear to be making itself felt in the Liberal Democrats’ poll share. “After Corbyn's election,” my colleague George tweeted recently, “Some predicted Lib Dems would rise like Lazarus. But poll ratings still stuck at 8 per cent.” Prior to the local elections, I was pessimistic that the so-called Liberal Democrat fightback could make itself felt at a national contest, when the party would have to fight on multiple fronts.

But the local elections – the first time since 1968 when every part of the mainland United Kingdom has had a vote on outside of a general election – proved that completely wrong. They  picked up 30 seats across England, though they had something of a nightmare in Stockport, and were reduced to just one seat in the Welsh Assembly. Their woes continued in Scotland, however, where they slipped to fifth place. They were even back to the third place had those votes been replicated on a national scale.

Polling has always been somewhat unkind to the Liberal Democrats outside of election campaigns, as the party has a low profile, particularly now it has just eight MPs. What appears to be happening at local by-elections and my expectation may be repeated at a general election is that when voters are presented with the option of a Liberal Democrat at the ballot box they find the idea surprisingly appealing.

Added to that, the Liberal Democrats’ happiest hunting grounds are clearly affluent, Conservative-leaning areas that voted for Remain in the referendum. All of which makes their hopes of a good second place in Witney – and a good night in the 2017 county councils – look rather less farfetched than you might expect. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.