I am grateful for the support that amendment 1, tabled by my right hon. Friend the Member for Don Valley (Caroline Flint), has received from MPs on both sides of the Chamber and a range of charities and voluntary organisations. The way in which
she prepared for the debate was excellent, and I wish I had done as well, but I was a little distracted by other issues.
New clause 9, tabled by me and other hon. Members, would require the Chancellor to publish an estimate of the impact on levels of tax avoidance and tax evasion of extending the current requirement on UK-based companies to publish information to companies incorporated in the Crown dependencies and overseas territories that have significant levels of trading activity in the UK. The purpose of the new clause is to take forward the Prime Minister’s commitment to have publicly available registers of beneficial ownership for all the Crown dependencies and overseas territories.
As others have said, it is difficult to estimate the amount held in tax havens. Some estimates have put the private financial wealth held in them at between £21 billion and £32 billion, and that money is untaxed or very lightly taxed. The French economist Zucman estimated that $7.6 trillion was held offshore last year, which is the equivalent of the US budget for two years. The OECD has estimated that tax havens may cost developing countries the equivalent of three times the global aid budget. We are talking big, big, big sums.
We saw from the Panama papers how much of the money that is held offshore is held in UK tax havens. Of the 214,000 corporate entities that were exposed in the Panama papers, more than half were registered in the British Virgin Islands. I draw Members’ attention to another interesting bit of data, which shows the role of tax havens and overseas territories. A World Bank review that looked at 213 corruption cases over 30 years, from 1980 to 2010, found that 70% of those cases involved anonymous shell entities. The UK Crown dependencies and overseas territories were second behind the US on the list of those providing the shell entities that enabled that corruption and money laundering to take place.
I welcome the action the Government have taken and the leadership they have shown on the international stage, and we could just stay where we are, but the purpose of the new clause is to urge them to go further. All these issues are being revealed, and will continue to be revealed, through leaks—we have had the Falciani leaks and the Luxembourg leaks, and we have now had the Panama leaks. I am waiting for the next set of leaks; I bet they are out there—I bet a whole bunch of journalists are working on them now—but is that the way we want to learn about how corrupt individuals and greedy corporations are hiding their money, aggressively avoiding and evading tax? Would it not be better if we did everything within our power and within our authority to open up these issues so that we could see whether people were paying their fair share of tax, based on their profits, wealth or earnings, depending on whether they were an individual or a corporation?
The Minister knows that people are really angry about this issue. It is not something that has been invented by Opposition Members. I receive huge swathes of emails and letters every time I raise the issue of tax evasion and tax avoidance. If he takes the action we are suggesting and closes down the tax havens, that will be not just popular but right. That may damage the interests of a few wealthy individuals or corporations, which I think the Minister holds in awe, but it will be in the
interests of the many, many people and small companies here in the UK who loyally pay their tax without any question.
I want to take the Minister through the pledges the Prime Minister has made. I was delighted in 2013 when he pledged at Loch Erne:
“Every one of the Crown Dependencies and Overseas Territories are going to have an action plan on beneficial ownership.”
In 2013 he also told them that it was time to rip aside the “cloak of secrecy” by creating a public register of beneficial ownership. In 2014 he wrote to the overseas territories urging them to consider having public registers of beneficial ownership, saying that
“beneficial ownership and public access to a central register is key to improving the transparency of company ownership and vital to meeting the urgent challenges of illicit finance and tax evasion.”
In 2015—this is the fourth example—he went to the Caribbean and again made clear his determination that overseas territories should open up. He said:
“I say to them all today, including those in this region, if we want to break the business model of stealing money and hiding it in places where it can’t be seen: transparency is the answer.”
We all agree with that, and we urge the Government to take action. They should stop talking and start acting. They should not always hide behind international co-operation. There is stuff that we can do now and that we should proceed with urgently.
If we are to know how much tax we lose from individuals hiding their money in anonymous accounts in the overseas territories and Crown dependencies—it could well be laundered money—and how much money global companies are hiding in tax havens as part of their aggressive tax avoidance strategies, we need every country to have a register of beneficial ownership, as set out in my right hon. Friend’s amendment, and those registers have to be public. That is especially important for developing countries.
As the Minister knows, we have the power to act. I fear that the reason the Government are not using their power is that they are happy to allow this massive tax avoidance and evasion to continue. I hope the Minister will reassure me in his reply that that is not the case, but that is what it feels like.
The Government have used the powers they currently have in other areas. We could therefore use an Order in Council to instruct all the overseas territories and Crown dependencies that are under our control to issue public registers of beneficial ownership. It is easy. The Conservative Government did it in the past when they used such Orders to ensure that capital punishment was abolished in overseas territories and Crown dependencies. A previous Labour Government used absolutely the same powers to ensure that discrimination against gay men was made illegal in overseas territories and Crown dependencies. If both the main political parties have used those powers in the past, why are the Government so reluctant to use them for something that is so popularly demanded and would be so important, and where they themselves agree that transparency has to be the way forward?
Some of the overseas territories are co-operating with the Government’s endeavours. However, newspaper reports tell us that the Cayman Islands and the British Virgin Islands are ignoring requests to meet officials to discuss evasion and avoidance. I understand that the Prime Minister has not met a single overseas territory
since he first made the commitment to take action on opening up these tax havens in August 2013. I also understand that the Minister asked the overseas territories with financial centres to have plans for registers of beneficial ownership by 2014, but he was ignored, and he is still doing nothing.
I have here a table prepared by Transparency International that shows the current commitments on beneficial ownership by overseas territories and Crown dependencies. As the Minister knows, it shows that Turks and Caicos has done nothing, the BVI has done nothing, and the Cayman Islands is half co-operating, while Bermuda and others are refusing to have a public central register. The only country in our control that is having a public central register is ourselves. I congratulate the Minister on that—we are setting an example—but let us use our powers to go further.
What we hear and read from the two most important overseas territories—the British Virgin Islands and the Cayman Islands—is a matter of great concern. The British Virgin Islands did not come to the anti-corruption summit; it is against the proposal. Its Premier and Minister of Finance, Orlando Smith, has said:
“The moment we begin housing vast amounts of highly sensitive, private business information and then providing access to that information to a wide array of actors, the risk of a breach goes up immeasurably.
If legitimate businesses fear that their international transactions will be exposed to the world, or, worse yet, accessed by criminals or terrorists”—
I am not sure how that will happen—
“and used as a weapon of extortion or intimidation—then the gears of international finance will start to grind.”
Talking about terrorists and criminals is purely an excuse. The British Virgin Islands simply does not want to open up the books. It does not want us to know what are the beneficial ownerships of companies that have registered there or individuals who hold their money there.
After the Prime Minister said that he had made such wonderful progress in ensuring registers of beneficial ownership that would help us to find out who owned what, where, Premier McLaughlin of the Cayman Islands said:
“This is what we wanted, this is what we have been pushing for three years, for a disaggregated system which leaves the beneficial ownership information intact with the service providers.”
He got away with what he wanted. He was not forced by us to reveal the data that we so desperately need to find out what is hidden there. He went on to say:
“People don’t do business with us because we are nice”.
That is simply not good enough.
I urge the Minister to take this little new clause really seriously. I will request a Division on it. I urge him to do what he says he wants to do and open up to public account the tax havens that we, the United Kingdom, control.
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