Tax havens — a secret scandal
All countries need tax revenue to fund vital public services like healthcare and education, and to redistribute wealth to tackle poverty and inequality. One of the biggest barriers to doing this is tax dodging by multinational companies and rich individuals shifting their profits into tax havens.
A staggering £20 trillion is now held by rich individuals in 'secrecy jurisdictions', better known as tax havens. This sum is equivalent to more than 13 times the annual output of the UK economy. If this money was taxed instead it could generate as much as £180 billion a year in tax revenue, more than twice the amount rich countries spend on overseas aid.
Multinational companies are only able to do this because they are allowed to – it is the tax rules of countries like the UK that allow them to dodge tax on such a massive scale. The UK plays a central role in this ‘offshore’ system, with its own network of island jurisdictions such as Jersey and the Cayman Islands ranking among some of the most significant tax havens in the world. The City of London itself acts as the nerve centre for these tax havens and supports an army of lawyers and accountants devoted to helping companies dodge tax.
The UK government can and must act to end the secrecy that allows companies to use the UK’s network of tax havens to avoid and evade tax. They should be required to have full transparency on the companies and trusts that are registered there, and who the real, beneficial owners of those companies are. They should also be made to comply with international tax agreements, including those providing for automatic information exchange; so that tax authorities in the UK and around the world can track the tax they are owed.
The UK government claims to be leading the fight against tax havens, with David Cameron saying that there are "too many tax havens, too many places where people and businesses manage to avoid paying taxes", yet it refuses to act to abolish the UK’s own global network of tax havens.
Ultimately we need to phase out tax havens and encourage those tax havens, in particular the island economies, to make the transition to a more transparent, ethical and sustainable economy.