Why is the British network of Treasure Island tax havens in trouble? Crime News


The exotic network of Treasure Island tax havens in the UK could be facing the greatest threat to its existence in half a century after the United States and its allies pledged to pay more taxes to the UK. large profitable multinational companies.

The often remote islands of the former British Empire have served as the primary jurisdiction for everyone, from cash-rich Chinese officials to Russian oligarchs to Western companies to hedge funds seeking lower taxes or total secrecy.

But a tax deal imposed by the finance ministers of the Group of Seven (G7) on a large 19th-century mansion near Buckingham Palace is likely to hit the UK Treasury Islands hard after decades of dodging attempts to the main economies of recovering income.

“This is a turning point,” said Alex Cobham, executive director of the Tax Justice Network, an advocacy group that campaigns against tax evasion. “We’ll look back in five or ten years and say, ‘Yeah, that’s when it changed.'”

“There’s a narrative shift: this active commitment to ending the race to the bottom,” Cobham said, though he accepted that specific details could still be poorly worded and that politicians for years have vowed to crack down.

According to estimates by the Tax Justice Network, the world loses $ 427 billion a year due to tax evasion by businesses and individuals. Approximately $ 245 billion is lost due to multinationals moving profits to tax havens and the other $ 182 billion is lost to wealthy people who rip off assets.

If the details of the G7 pledge become an applicable reality, global hidden profit flows could be redirected in one of the most fundamental ways since the days when the British empire collapsed in the 20th century.

When Britain’s power collapsed, some of its possessions became self-governing territories that were not part of the United Kingdom but were subject to British defense agreements and maintained strong ties with London.

Some of these 14 British overseas territories, including Bermuda, the British Virgin Islands (BVI), the Cayman Islands, Gibraltar and the Turks and Caicos Islands, began to make a living from a mix of beach tourism and exotic finances. which activists say they left both local and distant. taxpayers have changed.

Rival networks

British tax havens are responsible for 29 per cent of the $ 245 billion in taxes the world loses to businesses, according to the Tax Justice Network, which ranks BVI, the Cayman Islands and Bermuda as the top three facilitators of corporate tax abuse on the planet.

The finance ministries of the BVI, the Cayman Islands and Bermuda did not immediately respond to requests for comment.

Cobham has said that the British Isles most affected by the imminent redirection of corporate profits are facing a calculation that undermines the business model they have lived for decades and could lead to a high level of unemployment.

Essentially, two networks of rival and intertwined tax havens developed: a British lattice and a more continental European lattice, which includes Ireland, Cyprus, Luxembourg, Malta, the Netherlands, and Switzerland.

The G7 tax deal will make corporate tax havens much less attractive, as it gives countries the right to add a supplementary corporate income tax in countries with tax rates below the global minimum.

“Those who have traditionally served the personal market, that is, the palm market, if they wish, will generally get away with it,” said Richard Murphy, associate accountant and visiting professor of accounting at Sheffield University Management School. .

“It’s the big corporate locations like Luxembourg, like Ireland, like the Netherlands, that will really get the hit here,” he said.

The hardest hit countries are expected to push hard to maintain as many tax advantages as they can. Murphy said key accounting definitions, such as “profits” and “taxes paid,” have not yet been defined.

While Murphy saw less impact in many traditional British tax havens, he said that ultimately the most significant aspect of the G7 statement was that it sent a signal to the corporate world: “clean up your act.”

He said this would be a special concern, as many Western councils are facing shareholders pushing for better environmental, social and corporate governance.

“For the business community, this is sending a very big message of‘ get away from these places – you could have problems ’and in fact some of them will have problems,” he said.

“Obviously, technology will be affected, but so will financial services,” Murphy said. “Banking and financing are in the line of fire for this, as are some of the pharmaceutical companies.”

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