UK Is The Most Important Player In Global Tax Secrecy, Claim Activists

Stephen Little

11 November 2013

Despite the UK government's commitment to tackle tax secrecy, the UK is still the "most important global player in the financial secrecy world", according to a new study from the Tax Justice Network, a group which campaigns against offshore centres.

Although the TJN's latest index on bank secrecy ranked Switzerland in first place, the UK may in fact be the worst offender once Crown Dependencies and Overseas Territories are included, the group said in a report.

"While the UK itself ranks only in 21st place, it supports and partly controls a web of secrecy jurisdictions around the world, from Cayman and Bermuda to Jersey and Gibraltar. Had we aggregated the entire British network it would easily top the index, far above Switzerland," said the lobby group.

The Financial Secrecy Index combines a secrecy score with a weighting to create a ranking of the countries that most actively and aggressively promote secrecy in global finance.

While Switzerland has signed a number of treaties allowing information exchange in a bid to improve transparency, most notably with the US, it still retained its top place in the TJN index.

It was followed by Luxembourg, Hong Kong, Singapore and the Cayman Islands. The US, Lebanon, Jersey, Germany and Japan made up the rest of the top ten.

Transparency

Since the financial crisis, governments in Europe and the US have made it a key priority to increase transparency and stamp out tax evasion, in part because of these regions' dire budget positions.

Earlier this year, UK Prime Minister David Cameron identified tax as one of the main issues he wanted to concentrate on during the UK's presidency of the G8. Last month, Cameron announced moves against so-called shell companies to help combat tax evasion and in September he told parliament that he thought it was unfair to refer to Crown Dependencies and Overseas Territories as tax havens following the progress they have made regarding international tax matters.

In June, the UK's Overseas Territories and Crown Dependencies signed up to the Multilateral Convention on Mutual Assistance in Tax Matters, a protocol developed by the Council of Europe and the Organisation for Economic Cooperation and Development that facilitates cooperation between states on tax matters.

While some groups such as the TJN argue that offshore financial centres are harmful, other organisations, such as the Washington, DC-based think tank, the CATO Institute, argue that low-tax jurisdictions play a useful role in putting pressure on governments to keep taxes lower than might otherwise be the case, and fear that lobbyists such as TJN are trying to create a global tax "cartel" in the interests of a left-wing high-tax-and-spend political agenda.

As the TJN's own targeting and critique of the UK also shows, some of the old definitions of "offshore" and "onshore" are becoming increasingly blurred in any respect.

UK role

John Christensen, director of the Tax Justice Network, said that Britain played a key role in the global market for financial secrecy.

"The City of London uses a web of satellite secrecy jurisdictions based on British crown dependencies and overseas territories to channel huge illicit flows that feed London’s mad property boom," said Christensen.

"Despite Prime Minister David Cameron’s encouraging commitments to tackle Britain’s tax havens, little has been done so far to rein in the menagerie of offshore trusts, foundations, shell companies, loopholes and subterfuges that make up the global secrecy system. Rolling back the secrecy that shrouds up to $32 trillion in offshore financial assets remains one of the great challenges of the 21st century," added Christensen.