David Cameron used the G8 Summit in June 2013 to try to push for action on tax avoidance. However, given Britain’s role in the global network of tax havens, some have questioned his sincerity.

1. Dan Glazebrook, City College Bath
David
Cameron,
tax havens
and the G8
Cameron used the G8 Summit in June
to try to push for action on tax avoidance.
However, given Britain’s role in the global
network of tax havens, some have
questioned his sincerity.
The problem of tax avoidance has become a big issue in recent years
as anger grows at the ability of wealthy individuals and corporations
to move their money abroad into ‘tax havens’ with minimal taxes, and
thus cut down their tax bill. This is seen as particularly unfair at a time
when most people are suffering from ‘austerity’ measures brought on
by the recession – pay freezes, tax rises and cuts to public services and has become a hot political issue in part thanks to pressure groups
such as UK Uncut, who have highlighted tax avoidance by companies
such as Vodafone and Starbucks through organising ‘sit-ins’ of their
outlets.
It is estimated that wealthy individuals alone (not including corporations)
hold between ten and twenty trillion US dollars in offshore tax havens,
meaning avoidance of around £250billion - £500billion worth of tax.
But tax havens have also been criticised for the secrecy they provide
their users, which allows criminals to hide their money there. This is a
particular problem for developing countries, with weaker legal
frameworks and higher levels of corruption; a recent report by Global
Financial Integrity estimated flows of illicit money out of developing
countries into tax havens to total around $1.25 trillion per year,
(roughly ten times the total value of aid given to developing countries
by the rich world each year).
Britain has a particular responsibility for tackling tax havens, as over
half the world’s tax havens are at least partially controlled by Britain.
As tax haven expert Nicholas Shaxson puts it, “the City of London is
effectively the grand-daddy of the global offshore [tax haven] system”.
Crown dependencies such as Jersey, Guernsey and the Isle of Man are
major tax havens, as are overseas British territories such as the Cayman
islands, the Virgin islands, Bermuda and Gibraltar. Many of the others
are countries in the British Commonwealth with deep rooted ties to
Britain and the London banks.
So many tax campaigners were happy to see that David Cameron had
put dealing with tax avoidance at the top of the agenda of the recent
G8 Summit (a meeting between 8 of the world’s most powerful leaders).
Cameron had hoped to get leaders to sign up to an ‘action plan’ which
would help tackle tax avoidance by forcing companies to make it public
who they are owned by. This information could then be shared by
different tax authorities to ensure everyone paid their fair share.

2. Dan Glazebrook, City College Bath
David
Cameron,
tax havens
and the G8
(continued)
Unfortunately, little of substance was agreed. The final document was
more a ‘plan for a plan’ which avoided making any specific commitments
to achieve anything by any particular date, with Kevin Watkins of the
Overseas Development Institute calling it “simply a wish list”. Cameron
himself is partly to blame for this failure, according to the Guardian,
“for leaving it until it was too late to start the heavy lobbying that was
clearly going to be needed to get the rest of the G8 to move on tax”.
Cameron has also been criticised for hypocrisy on a number of counts.
Firstly, Britain is one of the only countries in the world where ‘bearer
shares’ can be bought; these shares are specifically designed to allow
their owners to remain anonymous, and the World Bank has criticised
them for facilitating money laundering. As one expert put it, “Other
countries will rightly challenge the sincerity of the proposals to
increase tax transparency. They will say: ‘get your own house in order
first’”. Secondly, the City of London authorities have been negotiating
with the Kenyan government on plans to create an ‘International
Financial Centre’ in Kenya. Many believe this will effectively turn Kenya
into the first tax haven in mainland Africa.
Whilst campaigners are pleased to see the issue of tax avoidance and
tax havens increasingly on the political agenda, many feel that Britain
is not doing enough to crack down. Having had his plans for change
watered down at the G8, Cameron can argue that he is unable to do
much without the cooperation of other countries. But with over half
the world’s tax havens controlled by the UK – and with UK banks
pushing for the creation of yet more – some believe there is a lot he
could do without anyone else’s help
Questions
What are ‘tax havens’, and why does Britain have a
particular responsibility for dealing with tax havens?
To what extent have UK Uncut been successful in
achieving their goals?
What pressures is Cameron likely to be under to
a) make a serious attempt to deal with tax havens?
b) prevent meaningful reform of tax havens?