Pressure building for mutual assistance on tax matters
Last week, British Prime Minister David Cameron proudly announced that he had persuaded the UK’s Overseas Territories and Crown dependencies to sign up to a tax evasion clampdown. They have agreed to sign up to the Multilateral Convention on Mutual Assistance in Tax Matters — an initiative led by the Organisation for Economic Co-operation and Development (OECD).
They have also agreed to publish national action plans on beneficial ownership, detailing the true owners of so-called “shell” companies. Alongside the new register, the Government is continuing to push for automatic information exchange with Britain’s Overseas Territories and Crown dependencies. Among this group are a number of Caribbean territories: Cayman Islands, Turks and Caicos Islands, British Virgin Islands, Anguilla, and Montserrat.
There is a background to this. For a generation former British colonies and current overseas territories in the Caribbean have been urged to diversify from their traditional economic activity of sugar, banana and spices. Many obediently did just that and went into financial services.
But in recent years Britain, Europe and America have sought to clamp down on financial services activity in the Caribbean, their preferred means being directives from the OECD. New rules and restrictions have often been imposed in the name of acting against tax evasion, money laundering, corruption and other financial malfeasance. But it is worth noting that there is more money laundered through the City of London than any other financial centre in the world.
This has led to a lurking suspicion that action against so-called tax havens is more about eliminating competition than a genuine wish to eliminate financial wrongdoing.
But the recent financial collapse has led to increased public scrutiny on the activities of the financial services industry. And the public view of bankers is now unremittingly hostile. Here in Britain, not only are bankers universally loathed, but there has been much recent public discussion about the way in which multinationals like Google and Amazon avoid paying tax.
The Public Accounts Committee in Parliament has laid bare the fact that big multinationals can evade paying huge sums in tax through clever accounting and the use of tax havens. And in a recession, when ordinary people are suffering, there is a very strong feeling that companies should pay their tax. This is partly why there was so much pressure for Cameron to be seen doing something about tax evasion.
It is not clear whether the new register of companies that Cameron has announced, which will reveal the true owners, will actually work. The register will not include trusts, and the UK business community will object strongly to it precisely because it will make it harder for them to avoid tax. But it gave Cameron a portentous announcement to make on the eve of the G8 summit for the world’s leading economic powers, which Britain hosted last week. And consequently the entire G8 signed up to the measures that Cameron had imposed on the Overseas Territories and Crown Dependencies.
However, it is not only rival financial jurisdictions that are concerned about tax evasion in overseas tax havens. Former UN Secretary General Kofi Annan has also spoken out on the subject. He said recently: “When foreign investors make extensive use of offshore companies, shell companies and tax havens, they weaken disclosure standards and undermine the efforts of reformers in Africa to promote transparency.”
Increasing international pressure for mutual assistance on tax matters is now affecting Jamaica’s neighbours, but it will eventually affect Jamaica. No doubt Jamaican policy makers are following the international debate with close attention.
— Diane Abbott is a British Labour party MP and spokeswoman on public health
