The UK’s Overseas Territories – tax havens to you and I – are among the world’s most notorious traders of financial services to tax evaders, the criminal and the corrupt.
One of the most common ways to do this is to set up an anonymously-owned company which allows you to hide who you really are and how you might have obtained your money. A World Bank study found that the Overseas Territories – including the British Virgin Islands, the Cayman Islands and Bermuda – are the world’s most popular places for the corrupt to set up this kind of company.
This continues despite the fact that UK government has ultimate control over the laws in its Territories and has been calling for financial transparency in the tax havens for years.
But now the Prime Minister has explicitly set out to stop the UK enabling this type of financial crime, and tackling the tax havens is the next logical step. Things are starting to happen, as developments this weekend showed:
- On Saturday, the UK’s Prime Minister David Cameron met with the heads of 10 Commonwealth countries and urged them to lead the fight against corruption, saying that corruption is “one of the greatest enemies of our time” which fuels terrorism and wrecks economies.
- On Sunday, the heads of 11 NGOs – including Global Witness, Oxfam, Christian Aid and others – sent an open letter to Mr. Cameron urging him to intensify the UK’s efforts increase transparency in the Territories. The letter’s demands were covered in today’s FT and Guardian. The message about the Territories needing to create public registries was also covered in this weekend’s Sunday Times.
- Today, a report on the Overseas Territories was published by Global Witness, Christian Aid, Tax Justice Network and TI-UK. It warns that the UK cannot credibly claim that it has made significant improvements with regard to financial secrecy when the Territories remain so opaque. It welcomes Montserrat’s recent move to become the first of the Territories to promise to put the names of beneficial owners into the public domain. It urges all of the Territories to do the same and to make this data fully public.
These developments follow a recent scaling-up of the UK’s fight against corruption and the corporate secrecy that enables it.
In 2013, the UK became the first country to commit to setting up a register of the real owners of companies, which would make life much harder for those with something to hide to evade the authorities. Then in July, Mr Cameron made a public statement vowing to lead the global fight against corruption. Heeding calls from Global Witness and others, he promised to stop the UK’s property market from becoming a safe haven for corrupt money and to host an Anti-Corruption Summit in 2016. These are very positive developments – but they are now being undermined by the continued resistance of the tax havens. Because while the UK’s efforts to lead by example are laudable, they will not be effective in stopping corruption while it is still easy to buy secrecy from its Overseas Territories.
The UK has been pushing the tax havens to open up for a while now, but in general they aren’t listening. In 2013, it convened its first meeting between British Ministers and the heads of seven of the UK’s Overseas Territories to crack down on tax evasion and financial crime. Since then, many of the Territories have flatly rejected Westminster’s demands for transparency, including the Cayman Islands (who said last week that no country in the world gave unfettered access to the information the UK was asking for) and the British Virgin Islands (who said this month that none of the Territories would agree to a public register as the industry and stakeholders were not in favour).
The time has come for the UK to get tough with the tax havens, starting this week. Tomorrow, the leaders of the Overseas Territories will again gather in London for their annual meeting. Top of the agenda will be the progress (or lack therefor) made by the Territories on the issue of beneficial ownership. As we said in the Sunday Times in anticipation of that meeting:
“The prime minister needs to show that the UK is as committed to fighting corruption in its own backyard as it is elsewhere in the world. That means making the UK’s tax havens put the names of the people who own and control companies in the public domain.”
We will be watching developments closely this week. The only way to tackle the world’s corruption problem is to set up public registries of the people who really own and control companies in the UK’s Overseas Territories and worldwide.