When I started reading about tax havens a few years ago, it seemed like a forgotten topic. Aside from jokes about Swiss bank accounts, it was an overlooked issue. That’s changing. Nicholas Shaxson cast new light on the subject with his book Treasure Islands. The Tackle Tax Havens and End Tax Haven Secrecy Campaigns were set up. President Obama has taken them seriously from the start. Celebrities and companies have been named and shamed for their dubious tax affairs. Most of all, the recession has created a big incentive to fix the problem, as governments wake up to the fact that claiming the tax they’re owed might be a good way of patching the holes in the budget.
Progress is slow, but it is happening, and this week saw a couple of steps forward. First, it has emerged that Britain is planning to follow in America’s footsteps and make tax havens declare the names of account holders. The US brought this in as the Foreign Account Tax Compliance Act (FATCA), which kicks in next year. Chancellor George Osborne is expected to announce a similar measure for the UK in his autumn statement.
Britain controls a number of the world’s best known tax havens, including Jersey and Guernsey, Bermuda and the Cayman Islands. Under the new legislation, those territories would have to share information with the UK tax authorities. This has come as something of a surprise to tax campaigners, not least because the British government has recently denied that any UK version of FATCA was needed. If this goes through now, it will be a real milestone in the long battle against predatory tax regimes.
The second development this week is a major new investigation by the BBC, the Guardian and the International Consortium of Investigative Journalists. A BBC Panorama episode was broadcast last night. The investigation centers around the practice of naming offshore directors of companies for the purposes of tax evasion. One way to hide tax is to create a shell company registered in a tax haven, and then use it as a vehicle to ‘acquire’ other companies. Those companies and their directors are often legal fictions, set up to disguise the true owners of a company. This latest investigation has prompted Business Secretary Vince Cable to launch an investigation of his own.
We’re nowhere near the end of the tax havens just yet, but we’re moving in the right direction. I look forward to hearing more about it in the Autumn statement. Next on the agenda: doing something about Britain’s bizarre non-domicile rules.