It is in the UK's power to end tax havens

Cameron needs to lead on tax dodging, because he has the power to stop it.

Tomorrow, David Cameron will be welcoming senior ministers from some of the UK’s tropical isles to London for a high level summit. Despite these jurisdictions’ sandy beaches and sunny weather the talk will be of tax, not tourism, as the likes of Bermuda, the Cayman Islands and the British Virgin Islands rank as some of the most significant tax havens in the world.

Cameron’s grand plan is to invite these jurisdictions to sign up to an international treaty on cooperation and information sharing with other countries tax authorities. Cameron is keen to show that the UK is committed to getting its house in order ahead of the G8 summit in Northern Ireland next week. With a huge domestic backlash at home over tax dodging by companies like Google, Amazon and Starbucks, Cameron is hoping the appearance of leadership on the global stage can win some positive headlines at home.

But show and appearance is all we will see over the next few days. The treaty Cameron is asking British tax havens to sign only tinkers around the edges of their secrecy. It will still leave the UK running many of the world’s most significant tax havens. That the government continues to allow multinational companies and rich individuals to use the UK’s tax havens to dodge taxes around the world, robbing the world’s poorest countries of vital revenue, is a scandal of truly epic proportions.

Experts from the Tax Justice Network have criticised this treaty for falling short of what would be needed to break open their secrecy. For a start it only requires jurisdictions to share information when they receive requests from other countries’ tax authorities, rather than automatically and routinely sharing information. Neither does it require tax havens to actually collect information on rich individuals and companies that shelter their money offshore. 

It is not entirely surprising the treaty is not exactly watertight. It is drafted by the OECD, a Paris-based think tank, comprising 34 of the world’s richest countries, tasked with setting the standards for international tax rules: a body that has steadfastly resisted any major change to those rules for over a decade.

At the 2009 G20 summit, when Gordon Brown famously hailed the “beginning of the end for tax havens”, the OECD was tasked with producing a ‘blacklist’ of uncooperative tax havens. So rigorous were the rules for this list that within one week there was not one country on the list.

However, the failure to reign in Britain’s tax havens is not one of diplomacy. It reflects a total lack of political ambition. The simple fact is that these islands are not separate sovereign countries and Cameron does not need to negotiate with them. They are in fact British territories, and the UK government has the power to legislate for them.

Cameron could simply abolish the UK’s tax havens by passing a law requiring them to end their secrecy, establish rigorous financial regulation and making profits and wealth their subject to effective taxes. 

The government has acted in the past to enforce laws on these island jurisdictions before, abolishing the death penalty for Britain’s Caribbean Islands in 1991 and as recently as the year 2000, acting to decriminalise homosexual acts in the Cayman Islands. 

The British government has even acknowledged its full ability to enforce financial regulation on the UK’s tax havens. The OECD noted in a 2012 report (pdf) “the UK acknowledged that – from a constitutional perspective the UK has unlimited power to legislate for the OTs [Overseas Territories]”. 

Cameron has tried to make huge political capital of talking tough on tax. Last year Cameron announced his intention to tackle tax havens during his G8 presidency with huge fanfare, saying: “There are too many tax havens, too many places where people and businesses manage to avoid paying taxes.” Again in Davos at the World Economic Forum the bold rhetoric was out in force, stealing lines from UK Uncut, when he told businesses that “carry on dodging their fair share” to “wake up and smell the coffee”.

To have any hope of living up to his tough tax talk, Cameron must legislate to abolish Britain’s tax havens. He is fully capable of closing down these tax havens, but is just choosing not to.

Grand Cayman. Photograph: Getty Images

Murray Worthy is an economic justice campaigner for War on Want.

Photo: Getty
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Will Britain end up agreeing a lengthy transition deal with the EU?

It's those seeking to prevent a referendum re-run who have the most to fear from a bungled exit.

You can check out, but you'll never leave? Today's papers all cover the growing momentum behind a transition arrangement after Britain leaves the European Union, whereby the United Kingdom remains in the single market and customs union.

The FT reports on the first meeting between Theresa May and her new “business council”, in which business leaders had one big message for the PM: no-one wants a “no deal” Brexit – and Confederation of British Industry director Carolyn Fairbairn repeated her call for a lengthy transition arrangement.

The Times splashes on government plans drawn up by Philip Hammond that include a two-year transition arrangement and private remarks by David Prior, a junior minister, that Britain was headed for “the softest of soft Brexits”.

A cabinet source tells the Guardian that the transition will last even longer than that – a four-year period in which the United Kingdom remains in the single market.

Broadly, the argument at the cabinet table for a transition deal has been won, with the lingering issue the question of how long a transition would run for. The fear among Brexiteers, of course, is that a temporary arrangement would become permanent.

Their long-term difficulty is Remainers' present problem: that no one is changing their minds on whether or not Brexit is a good idea. Put crudely, every year the passing of time winnows away at that Leave lead. When you add the surprise and anger in this morning's papers over what ought to be a routine fact of Brexit – that when the UK is no longer subject to the free movement of people, our own rights of free movement will end – the longer the transition, the better the chances that if parliament's Remainers can force a re-run on whether we really want to go through with this, that Britain will stay in the EU.

A quick two-year transition means coming out of the bloc in 2022, however, just when this parliament is due to end. Any dislocation at that point surely boosts Jeremy Corbyn's chances of getting into Downing Street, so that option won't work for the government either.

There's another factor in all this: a transition deal isn't simply a question of the British government deciding it wants one. It also hinges on progress in the Brexit talks. Politico has a helpful run-down of the progress, or lack thereof, so far – and basically, the worse they go, the less control the United Kingdom has over the shape of the final deal.

But paradoxically, it's those seeking to prevent a referendum re-run who have the most to fear from a bungled exit. The more time is wasted, the more likely that the UK ends up having to agree to a prolonged transition, with the timing of a full-blown trade deal at the EU's convenience. And the longer the transition, the better the chances for Remainers of winning a replay. 

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