UK overseas territories top list of world’s leading tax havens

Britain’s overseas territories have topped a list of the world’s most significant tax havens ahead of Switzerland, the Netherlands and Luxembourg, according to the campaign group Tax Justice Network.

The British Virgin Islands were ranked as the “greatest enabler of corporate tax abuse”, with the Cayman Islands in second place and Bermuda third.

Britain appeared in the study, which is published every two years, at number 13, alongside its network of satellite territories. It was singled out for providing the widest scope for international corporations to cut their tax bills.

The United Arab Emirates (UAE) was a new entry into the top 10 after an investigation found it had benefited from $250bn (£180bn) of multinational funds routed through the Netherlands.

The report said the UAE had emerged as a new destination for multinational corporations operating in Africa and the Middle East. South Africa was highlighted as one of the biggest losers from firms shifting profits to the low-tax UAE.

A spokesperson for the Tax Justice Network said tax havens were thriving and efforts to tackle the problem co-ordinated by the Paris-based club of rich nations, the OECD, had failed.

Dereje Alemayehu, the executive coordinator of the Nobel peace prize-nominated Global Alliance for Tax Justice, said the report’s findings showed the biggest economies in the world were helping companies avoid $245bn in tax, and “to trust the OECD in light of its findings is like trusting a pack of wolves to build a fence around your chicken coop”.

The corporate tax haven index ranks each country based on how intensely its tax and financial systems allow multinational corporations to lower their taxable profits.

Grading each country’s tax and legal system with a “haven score” out of 100, the British Virgin Islands, the Cayman Islands and Bermuda all gained the maximum score.

“A higher rank on the index does not necessarily mean a jurisdiction’s corporate tax laws are more aggressive, but rather that the jurisdiction in practice plays a bigger role globally in enabling the profit shifting that costs countries billions in lost tax every year,” the spokesperson said.

The OECD represents 37 mostly wealthy western governments and has spent much of the last decade attempting to get agreement on rules that prevent tax avoidance by wealthy individuals and major corporations.

The report said OECD countries were responsible for 39% of the world’s corporate tax abuse risks. Their territories and former colonies – such as the UK’s independent territories and Jersey, Guernsey and the Isle of Man, which are crown dependencies – were responsible for 29%.

Countries graded by the OECD as “not harmful” are responsible for 98% of the world’s corporate tax abuses risks, the report said, adding that the UN should take over the role of fostering global tax rules.

Pascal Saint-Amans, the director of the OECD’s tax policy centre, said the report failed to recognise the progress made in recent years to share tax information and clamp down on a string of abuses.

He said 500,000 people with secret bank accounts had declared their income and paid back-taxes and fines in the last four years after an agreement that involved the bank details of 84m accounts being shared by tax authorities.

A deal to set a minimum tax rate for digital services, allowing developing world nations to grab a slice of profits made by Facebook, Amazon and Google, will be debated by the G20 in July.

Saint-Amans said the Joe Biden administration in the US had indicated it wanted a deal covering digital services after the more “erratic” stance of the Donald Trump White House held up progress.

Britain’s overseas territories and crown dependencies have argued that they cannot be considered tax havens following the crackdown on the secret bank accounts held by individuals.

But the Tax Justice Network said they continued to facilitate capital flight from many of the world’s poorest nations, allowing multinational corporations to avoid legitimate claims on their profits.

The top 10 biggest enablers of global corporate tax abuse

1 British Virgin Islands (British overseas territory)
2 Cayman Islands (British overseas territory)
3 Bermuda (British overseas territory)
4 Netherlands
5 Switzerland
6 Luxembourg
7 Hong Kong
8 Jersey (British crown dependency)
9 Singapore
10 United Arab Emirates