UK territories blamed for bulk of global tax dodging

| 28/05/2019 | 31 Comments

Cayman News Service(CNS): The UK’s overseas territories are largely responsible for the breakdown in the global tax system and helping major global corporations dodge their tax obligations, according to a new report released Tuesday. The British Virgin Islands, Bermuda and the Cayman Islands are listed as the top three jurisdictions in the world that have “aggressively undermined the ability of governments across the world to meaningfully tax multinational corporations”, according to the Corporate Tax Haven Index, published by the Tax Justice Network.

The organisation, which has long criticised the offshore financial sector and jurisdictions like Cayman for the part they play in facilitating an estimated $500 billion in corporate tax dodging each year globally by multinationals, said it was time for new tax rules to ensure that corporations are taxed “where employees work, not where ledgers hide”.

The controversial report has identified the UK and a handful of other OECD countries as bearing the lion’s share of responsibility through its “controlled network of satellite jurisdictions”, referring to the territories. TJN said this is the first ever study of its size and scope based on data that ranks countries by their “complicity in global corporate tax havenry”.

While the findings are likely to be dismissed by the territories’ governments and the offshore finance industry, this research gains traction with ordinary people in onshore countries who must pay their own taxes but watch as massively profitable multinationals like Google and Amazon pay almost none.

And it is public sentiment on perceived unjust tax systems that leads governments to pledge crackdowns. This has seen the UK insist on the implementation in its territories of policies like beneficial ownership registers before they become the global standard.

The UK is likely to face a general election before the end of this year, and if the Labour Party wins, Cayman and other territories could face even greater imposition.

“While Tory leadership hopefuls promise tax giveaways for the rich, a Labour government will implement the most comprehensive plan ever seen in the UK to tackle tax avoidance and evasion,” Shadow Chancellor John McDonnell said following the release of the report.

The index finds that the top ten countries are responsible for 52% of the world’s corporate tax avoidance risks. Over two-fifths of global foreign direct investment reported by the International Monetary Fund is booked in these countries, which have either no or very low corporate tax rates.

TJN accuses them of wooing multinational corporations and making statutory corporate tax rates in other countries meaningless. It also accuses them of triggering a “race to the bottom” across the globe and suggests that what is often referred to as ‘tax competition” is more aptly described as “tax war”.

While the UK itself ranks 13th on the index, the British Overseas Territories and Crown Dependencies dominate the top ten. TJN said the British corporate tax haven network is “by far the world’s greatest enabler of corporate tax avoidance”.

Alex Cobham, chief executive at the Tax Justice Network, said governments’ ability to tax multinational corporations to pay teachers’ wages, build hospitals and ensure a level playing field for local businesses has been undermined.

“When our laws for taxing global corporations stop working, the global economy stops working for the vast majority of us,” he said. “All around us we see inequalities go unaddressed, political extremism unchallenged and democratic institutions faltering – and the thread that runs through it all is a failure to defend progressive taxation.

“To curtail the corporate tax avoidance that costs hundreds of billions of dollars every year, governments must finally deliver international rules that ensure profits are declared, and tax paid, in the places where real economic activity takes place,” Cobham added.

See the index in full here

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Category: Business, Financial Services

Comments (31)

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  1. Anonymous says:

    Tax competition is good for everyone except the high-tax jurisdictions. There is nothing illegal or immoral about a company choosing to pay less tax legally. They’re not “tax dodgers”.

    I think when the EU comes for the funds industry (which it will) the Cayman Islands and the rest of the overseas territories need to make a stand. Appeasement hasn’t worked – every hoop we jump through just makes them put the next one a little higher. As a group the BOTs need to refuse AND threaten to repeal every piece of legislation they’ve made us pass if we are put on a blacklist.

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  2. ANNON says:

    $500 Billion isnt even Half of the US annual deficit. that amount spread over all the worlds nations is not very significant.

  3. Anonymous says:

    On page 230, you can see that they just decided to assign us a value of “100” in every category across the board. Refuting the existence of any double taxation agreements, exchange mechanisms, or tax cooperation.

    https://www.corporatetaxhavenindex.org/PDF/CTHI-Methodology.pdf

    I almost feel sorry for the EU Horizon 2020 for having made the grant to sponsor this trash. The TJN had revenue of $5.8mln last year selling this sham “research” to whatever media were buying. Alex Cobham has probably done quite well.

    If we had a literate Cabinet, the highest priority would be defending the jurisdiction’s number one economic pillar from repeated false attacks…but this regime would rather waste our money suing the gay ladies that love each other and impair them, and their child, from being legally identified as a family.

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  4. Anonymous says:

    Haha… so TJN is now saying places like Bermuda, the BVI and gold old 345 are making the onshore laws that are “aggressively undermined the ability of governments across the world to meaningfully tax multinational corporations”. Hahahahaha… we only wish we had such power!

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  5. Anonymous says:

    Oh kiss our a**es, we never begged anyone to be tax free, we recieved it through helping a British ship in a bloody storm.

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  6. Anonymous says:

    Imagine what will happen if Corbyn and his left-wing gang get into government in the UK after this?

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    • Anonymous says:

      Imagine what will happen if Boris Johnson and his right wing Little Englander gang get into government in the UK? Donald Trump is going to London next week to officially endorse the clown Johnson. Trump said on his last visit to London that clown Boris would make the greatest UK PM. Sad but true.

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  7. Bertie : B says:

    Delaware / Wyoming and Nevada , all are acting participants for opening and running shell companies with offshore protection same as all the so called U.K territories , Splain That !

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    • Anonymous says:

      The US tax laws deal with this specifically in minute detail. Parking income overseas is part of our tax policy. The EU lacks a coherent tax policy. This is their problem.

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    • Anonymous says:

      1:12 They are not BOTs
      Trump will sort out his US citizens and Tax Haven Territories’ Accounts, eventually.

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  8. "do as I say, not as I do" says:

    Note that the companies paying the least tax are the exact same ones pushing “tax fairness” and other leftist claptrap. They’re in bed with the politicians. Hypocrites all!

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  9. Anonymous says:

    Politicians waste the taxpayers money, then point the finger and blame someone else. And the gullible voters fall for it every time.

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  10. Anonymous says:

    The TJN and their ilk do not admit that hugely profitable companies like Amazon paying no US federal taxes has everything to do with the application of US taxes and incentives (tax breaks) and next to nothing or nothing at all to do with international financial centres like the Cayman Islands.

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    • Anonymous says:

      Not only did Amazon pay 0 in federal taxes on >$11Bln in 2018, but it also received a Federal Tax rebate of USD$129mln. General Motors, Southwest Airlines, and Goldman Sachs all posted net tax benefits in years since 2008. These realities had nothing to do with places like the Cayman Islands, and everything to do with corporate tax codes elsewhere, that are never in the crosshairs of advocacy groups like TJN.

      https://www.cnbc.com/2019/04/03/why-amazon-paid-no-federal-income-tax.html

  11. Anonymous says:

    I will guarantee you that if any country imposed a 99% tax rate on corporations or high income earners you will not hear a thing from the tax “justice” network because in their view there is nothing unjust about that. And that tells you all you need to know about the kind of organization the tax justice network is.

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    • Anonymous says:

      Now let’s tell that to the average tax rate countries. Perhaps they can show us the benefits of high tax by increasing the taxes on their citizens some more. Since it’s such a good thing to do and all that.

  12. Anonymous says:

    but cayman is a christian nation….built on ‘financial services’….źzzzzz

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  13. Anonymous says:

    Sure, they conveniently would be. SMH

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  14. Anonymous says:

    Who are these people anyway? Do we have a new world policeman that replaces the United Nations?

    Their self described description of what a tax haven is, shows their total lack of understanding.

    “A corporate tax haven is pretty much what most people would imagine it to be: a jurisdiction that provides facilities to help multinationals escape taxes elsewhere. More formally, we define it as

    “A jurisdiction that seeks to attract multinational companies by offering facilities that enable them to escape or undermine the tax laws, rules and regulations of other jurisdictions, reducing their tax payments in these jurisdictions.

    This tax payment reduction result from tax base spillovers (shifting profits, tax avoidance) and/or strategic spillovers (race to the bottom effects which prompt jurisdictions to lower their tax rates or tax base in response).”

    (To see how we define, identify and measure corporate tax havens, look at the “Methodology” section).

    Don’t be misled by a country’s headline tax rate: this rate might be bypassed through sweetheart deals between the tax administration and multinationals, and its tax system may well contain gaps and loopholes. Luxembourg, for instance, claims to tax corporate income at 26 percent. Yet LuxLeaks revealed that some multinationals were taxed at less than 1 percent.

    The world of offshore tax havens is a global ecosystem, where different jurisdictions offer different mixes of facilities to mobile forms of financial capital. Corporate tax havens are among the most important players in this system, but others exist. For example, our Financial Secrecy Index ranks ”secrecy jurisdictions” which attract illicit financial flows by providing laws and other facilities to hide that capital and its ownership from the public, or from the forces of law and order. There are also “regulatory havens” which provide facilities to help multinational corporations escape financial (and other) regulations. And so on.

    Ireland, for instance, is a very large corporate tax haven which is near the top of the CTHI, yet it is a relatively transparent jurisdiction with a fairly low ranking on the Financial Secrecy Index. Switzerland and Luxembourg, by contrast, are major secrecy jurisdictions and also very large corporate tax havens, so they rank high in both indexes.”

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  15. Anonymous says:

    Thanks a lot BVI

  16. Anonymous says:

    We’re really getting to the end of the road on demonizing BOTs. TJN should shift their future reporting dollars towards probing and publishing a ranking of the countries with the longest and most deliberately complicated tax codes on the planet, and then challenge those regimes (and their accounting firm advisors) to honour their domestic tax residents by fixing their own tax collection loopholes. Continuing to blame small tax cooperative far away islands for others’ endless tax inefficiency is a weakening position, if there isn’t also a thrust to correct the faulty tax code at the source.

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    • Anonymous says:

      Especially somewhere like Cayman that has had indirect taxation for at least 110 years. That was the only way for the government to extract any significant revenue from the economic activity on island, to tax it when it arrived, back in the old days. But the “Tax Justice Network” makes out like we decided to have this tax system to gain regulatory advantage. Yes, some Cambridge smarty-pants came here in the 60s and 70s and suggested ways to monetise our system of indirect taxation, but they didn’t come up with it. And we didn’t come up with it to take anything from anywhere else; just to collect from our own people, enough to run a government. That’s what we continue to do, and that’s what the Tax Justice Network does not understand.

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    • Anonymous says:

      I love this comment, what they are basically saying is that a couple of tiny islands with less than 150,000 people combined are smarter than the global super powers and they have managed to do absolutely nothing about it for 100 years. Well done to us!

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  17. Anonymous says:

    Cayman will wait until Trump pokes around before they consider doing anything.
    Karma supersedes greed.

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    • Anonymous says:

      Karma would be that orange conman having his tax returns released so white America can see how stupid they have been, He has no need for complex offshore avoidance structures – he has been practicing the art of the steal in plain sight for decades. tRump poking around would be the ultimate in hypocrisy.

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  18. Anonymous says:

    Delaware is too big to pick on eh?

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