Action Aid has published a report today on the use of tax havens by FTSE 100 companies that builds on work originally done here. In its summary of its findings it says:
The full extent to which FTSE 100 companies use tax havens has, for the first time, been compiled, analysed and published in an accessible and searchable format by ActionAid.
Of the 100 biggest groups listed on the London Stock Exchange, 98 use tax havens. ActionAid's research shows just how embedded the use of tax havens is in the structures of nearly all Britain's biggest companies.The findings are of particular concern because many FTSE 100 groups are set to benefit from plans currently under consideration by the Treasury to give multinational companies using tax havens an £840 million tax break, by relaxing the very rules designed to prevent tax-haven abuse.
An expanded tax revenue base in developing countries is the only sustainable source of funding for governments to invest in reducing poverty and inequality. It means that they don't need to depend on aid and can achieve self-reliance. Yet, the OECD estimates that developing countries lose almost three times more to tax havens than all the aid they receive each year. Spent effectively, this sum would easily be sufficient to achieve the Millennium Development Goals.
Corporate tax avoidance, one of the main reasons companies use tax havens, has a massive impact on developing and developed countries alike. The lack of transparency makes it difficult for developing country tax authorities to identify and collect taxes owed by global companies operating in their countries. With this in mind, ActionAid's research raises serious questions about many of Britain's best known businesses. How has the use of tax havens reached such epidemic levels? What is the impact on the UK exchequer, the stability of the international financial system and the ability of developing countries to raise tax revenues to invest in reducing poverty?
ActionAid found that:
- The FTSE 100 largest groups registered on the London Stock Exchange comprise 34,216 subsidiary companies, joint ventures and associates. _
- 38% (8,492) of their overseas companies are located in tax havens.
- 98 groups declared tax haven companies, with only two groups, Fresnillo and Hargreaves Landsdown, who did not._
- The banking sector makes heaviest use of tax havens, with a total of 1,649 tax haven companies between the ‘big four' banks. They are by far the biggest users of the Cayman Islands, where Barclays alone has 174 companies.
- The biggest tax haven user overall is the advertising company WPP, which has 611 tax haven companies.
- The FTSE 100 companies make much more use of tax havens than their American equivalents.
- There are over 600 FTSE 100 subsidiary companies in Jersey (more than in the whole of China), 400 in the Cayman Islands and 300 in Luxembourg — all tiny tax havens.
We believe that the FTSE 100 have big questions to answer about why they require such a massive number of companies registered in tax havens. While this piece of research in itself does not prove tax avoidance, it highlights the extent of these multinational groups' operations in places that provide tax advantages and help obscure information.
In recent times, politicians around the world and across the political spectrum have talked tough on cracking down on the use of tax havens to avoid taxes. With both developing and developed countries continuing to suffer the effects of the global financial crisis, decisive action to tackle tax havens from both the UK government and G20 leaders is well overdue.
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The whole tax haven thing is nonsense, Where do companies like vodafone get the money to pay taxes?? from their customers, So by asking for corporations to pay more taxes you are implicitly saying you want the cost of things you goods/services they provide to go up in price, Why dont we copy Hong Kong a thriving vibrant free market.
I will reply in a blog
Because we aren’t Hong Kong. And while we are at it, why can’t a woman be more like a man. Why can’t an apple be more like a tangerine.
Comparisons with Hong Kong are quite absurd a) becausevof culture b) lack of democratic accountability c) we are not the gateway to China taking a rentoff all thatpasses through
by the definitions in the report, anyone who trades in ireland or the Netherlands (which is surely any group who are pan-european) will have a subsidiary in a “tax haven”.
So whilst the headline 98 out of 100 is nice and sensationalist and designed to shock and therefore give publicity to the report, the sad fact is that many of these “tax haven” subsidiaries might actually be normal boring trading entities in Ireland and the Netherlands.
if that resulted in misclassification of one ftse company I would be amazed
Maybe it wouldn’t but why couldn’t it have been covered off in the report ie we have excluded active local trading entities?
If you know anything at all about tax havens you would know it is impossible to identify in most cases what are, and are not, trading entities. That’s because they keep it secret……
come on richard – its not that hard to look at the website of a FTSE company and see if they are trading in the Netherlands or Ireland
So that’s one out of maybe many subs
And the rest of them?
And such sites from my research are also seriously unreliable – even the Big 4 get theirs wrong
There are some problems with this research
Firstly, the research makes no mention of the effective tax rates paid by the companies, compared to their expected tax rates based on their operations. So there is no actual evidence of how much companies may be benefiting from having a tax haven subsidiary. I am not doubting many do, just that simply saying the worst offenders are the ones that have the most companies is very simplistic.
Secondly, it ignores that for a UK company owned by UK shareholders, every £1 saved in tax is still subject to dividend tax, so there is some claw back of the tax avoided, around a third for a higher rate taxpayer.
Thirdly, the number of tax haven subsidiaries that a company has could be a hangover from doing many acquisitions, and picking up subsidiaries along the way. I know from experience that it is sometimes difficult to shut down subsidiaries that you acquire given contracts they have etc.
I’ve done work on effective tax rates but am always told it proves nothing….so this is just a no win excuse on your part
Second, there is no dividend tax now! So that’s just wrong now.
Third, that’s just an excuse and still clear indication of extensive use
If that’s the best that can be offered it’s lame
Do you recall the divorce case of a premiership footballer which revealed that the player had paid almost zero tax,
Yet how often do politicians bash bankers instead of footballers……
ActionAid have a petition attached to their interactive map on this: http://www.actionaid.org.uk/103031/ftse_100_tax_haven_tracker.html#petition
The lack of transparency makes it difficult for developing country tax authorities to identify and collect taxes owed by global companies operating in their countries,
Bu there is a way to help the tax authorities. Read more: http://citizensforaction.weebly.com
I agree with the general thrust of your argument. But I have some genuine puzzlement as to what comes next. For instance if UK companies give up Tax Havens what economic damage will happen to the UK, say, by other countries taking up the “slack”. That is, is unilateral action ineffective? Also many developing governments, to be frank, have corrupt governments and poor tax administration, would not an increase tax take just line the pockets of dictatorsand their cronies? It’s hard enough to get Aid to the right people,
( I know) let alone Tax proceeds.
[…] report on tax haven abuse by major corporations has already arrived on my blog. A commenter says: The whole tax haven thing is nonsense, Where do companies like Vodafone get the money to pay […]