UK overseas territories are world’s worst corporate tax havens, says report

UK overseas territories including the British Virgin Islands make up the world’s worst tax havens and are responsible for an estimated £63bn in global tax avoidance, according to a new study.

The Tax Justice Network’s latest corporate tax haven index, released today, ranks countries on their complicity in helping multinational corporations underpay income tax in other countries.

The British Virgin Islands, Cayman Islands and Bermuda – all UK overseas territories, which the Westminster government has legal and constitutional responsibility for – make up the top three.

The UK is responsible for a third of corporate tax abuse risks, and remains the biggest barrier to stop corporate tax avoidance, the Tax Justice Network claims.

Countries are estimated to lose £63bn in corporate tax each year due to multinational corporations using the UK and its overseas tax havens, it estimates. When tax evasion from wealthy individuals is included, the amount rises to £126bn.

“Corporate tax abuse robs governments of public money and robs people of a better future,” the campaign group argued. “We urge all governments to use the index to tackle corporate tax abuse at home and abroad.”

HMRC claimed it had brought in almost £700m via international anti-tax avoidance initiatives, adding that British overseas territories share information with UK authorities on request.

Corporate tax abuse robs governments of public money and robs people of a better future.

The Tax Justice Network said the UK has helped deter tax abuse at home by increasing the corporate income tax rate and introducing reporting measures that help HMRC better audit multinational corporations’ accounts.

It accused previous Westminster governments of having a “rules for me, not for thee” attitude after opposing a bid to give the UN more say on global tax rules.

The new Labour government must back future UN efforts, the advocacy group urged, arguing such a move would offer the best chance in a century to end global corporate tax abuse, and prevent the loss of an estimated £3.6bn to global tax havens over the next decade.

Requiring British overseas territories to install the same transparency measures as the UK would prove the country is a “responsible player when it comes to international tax reform,” it said.

Citing the previous edition of the corporate tax haven index, David Lammy, the UK foreign minister, said in a speech the month before entering government that the high tax haven ranking of UK overseas territories was “a contradiction that cuts into our credibility”.

“Britain’s regime are giving with one hand but turning a blind eye to theft with the other”, he added. “We must be honest about this and we must solve it together.”

Liz Nelson, the Tax Justice Network’s director of advocacy and research, said: “The UK’s ‘rules for me, not for thee’ attitude is exactly why countries must press on with plans to agree global tax rules democratically at the UN.

The UK is protecting its economy with better tax rules, while sabotaging countries at the UN from getting out from under the thumb of British tax havens.

Liz Nelson, Tax Justice Network

“The UK is protecting its economy with better tax rules, while sabotaging countries at the UN from getting out from under the thumb of British tax havens. Tax havenry is a lose-lose game and this is made painfully clear by the UK trailing behind its peers on so many benchmarks.”

She added: “The UK’s new government now faces a crucial decision. Will it stay in the diplomatic corner that the previous government has backed it into, and continue to reject the overwhelming global momentum for an inclusive and effective global tax body at the UN?

“Or will the new government deliver on its commitment to principles of honesty and fairness, and become a champion instead?”.

HMRC said all UK crown dependencies, such as Jersey and Guernsey, and overseas territories had committed to recording the true owners of companies and sharing this information on request with UK authorities.

The UK had brought in almost £700m via international anti-tax avoidance initiatives, including the common reporting standard – a worldwide information-gathering and reporting requirement for financial institutions, it claimed.

By the end of 2022 more than 100 countries shared information with HMRC, with over 9.2 million accounts reported, it added. This compared to the first exchange in 2016, where 1.6 million accounts were reported from 47 jurisdictions.

Main image: Wendy Gunderson/iStock