UK’s ‘tax haven empire’ costs the EU $9 billion a year

Humanity has managed to sequence its genome, orbit the Moon, and photograph a black hole, yet it still has not found a way to eliminate tax havens and the schemes multinational corporations use to reduce their tax bills. The United Kingdom’s overseas territories and Crown dependencies rank among the world’s most harmful jurisdictions for corporate taxation and deprive EU member states of some €8 billion ($9 billion) in annual tax revenue, according to the latest update of the Corporate Tax Haven Index published Thursday by the NGO Tax Justice Network. The top 10 also includes three EU member states: the Netherlands, Ireland, and Luxembourg.For the first time, the organization has estimated in this edition the fiscal damage that jurisdictions linked to the U.K. inflict on other countries in terms of lost tax revenue. Small territories scattered across the Caribbean and the North Atlantic, all tied to the United Kingdom, top the ranking: the British Virgin Islands, the Cayman Islands, and Bermuda occupy the first three positions and are responsible for 7%, 6.7%, and 5.4%, respectively, of total global corporate tax abuse.Switzerland ranks fourth, followed by Singapore and Hong Kong. In seventh place comes the first EU member state, which, according to the report, accounts for 4.25% of global corporate tax abuse. Jersey, a British Crown dependency, occupies eighth place. Ireland and Luxembourg round out the top 10, but Britain’s presence in the ranking does not end there. Guernsey and the Isle of Man rank 12th and 13th.Because jurisdictions linked to the U.K. occupy so many of the top positions in the index, researchers speak of a “second empire” or the “U.K. spider’s web” that, according to the NGO’s analysis, “operates as a web of tax havens laundering and shifting money into and out of the City of London at its center.”France and Germany are the countries most affected by this network. The estimated tax revenue losses caused by the aggressive tax arrangements of these territories amount to €2.79 billion ($3.76 billion) in Germany’s case, out of the €11.8 billion ($13.3 billion) it loses each year because of all tax havens, not just British-linked ones, and €1.41 billion ($1.58 billion) in France, equivalent to 21.3% of its total losses. Luxembourg ranks fourth with €570 million ($640 million) (17.7%), followed by Spain with €475 million ($533 million) (9.9%).“Together, the U.K. and its network of British tax havens are responsible for 31% of the global corporate tax abuse risks identified by the Corporate Tax Haven Index,” the report says. The United Kingdom itself loses about £12.8 billion a year ($17.3 billion) because multinational companies use tax havens around the world to reduce their tax bill in the country.BlacklistsThe Corporate Tax Haven Index, compiled by Tax Justice Network, ranks jurisdictions according to the tools they offer large corporations to reduce their tax bills. Specifically, it examines both domestic rules — including corporate tax features, the existence of preferential regimes for certain investments, participation in international anti-avoidance measures, and other factors — as well as foreign direct investment flows by multinational companies, both inbound and outbound, using data from the International Monetary Fund (IMF).According to the organization, its analysis of the financial activity reported by multinational corporations in these jurisdictions is what sets the index apart from most existing blacklists. Indeed, the EU’s blacklist, which has steadily shrunk since its first publication in 2017, includes none of the jurisdictions that rank in the Tax Justice Network’s top 10 and has never included an EU member state. Only the British Virgin Islands appear on the EU’s so-called grey list: jurisdictions that are not considered fully tax transparent but are cooperating and have committed to reforming their tax systems.“Many countries still fail to require companies to disclose basic information needed to detect corporate tax abuse,” Moran Harari, head of the index at the Tax Justice Network, said in a statement. According to the NGO, the fact that jurisdictions have shown little improvement in the index suggests that the international agreement reached in 2021 — under the auspices of the Organisation for Economic Co-operation and Development (OECD) to impose higher taxes on large multinationals —is insufficient, particularly after setbacks in subsequent negotiations. The organization therefore calls for progress on the United Nations tax convention.“The U.K. and EU stand to gain the most from the changes the U.N. tax convention aims to deliver, but they remain opposed to them,” said Harari. “They continue to hold on to the discredited and unscientific fantasy of ‘tax competition’ but our findings today again confirm that this only leads to a race to the bottom with no winners.”Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition