The Tax Justice Network index points to the UK, Switzerland, Singapore, Hong Kong and Ireland as the world’s leading facilitators of corporate tax evasion
The independent British Tax Justice Network coalition revealed on 1 October the ranking of tax havens in the world, where they point out that the UK is the largest facilitator of corporate tax evasion in the world.
The Corporate Tax Paradise Index ranks countries, according to their degree of complicity in helping multinational corporations pay less corporate income taxes in other countries.
Global findings include that the British Virgin Islands, the Cayman Islands and Bermuda (View Graph) remain the biggest threat to countries’ public coffers, while the United Kingdom builds its own defences against global corporate tax abuse.
According to the report, the UK’s attitude of – rules for me, not for you, is the reason why countries must move forward with plans to agree on global tax rules democratically at the UN. While lax or undemanding rules on royalties and service charges turn out to be the biggest divisive point between countries that improved or worsened their classification.
Other findings from British tax havens include that the UK is responsible for one third of the risks of corporate tax abuse, but is rated not harmful by the OECD. In addition, it urges the new UK government to break with previous attempts to “kill the UN tax convention” and to fulfil its commitment to honesty.
Based on the report, European Union countries are also responsible for a third of the risks of corporate tax abuse, but eventually abandon their opposition to the UN tax convention. However, improvements in royalties and service charges are tarnished by significant gaps in the European Union (EU) Tax avoidance directive. The EU also has a list of tax havens in which many of its members do not appear.
Ireland enter the top 10 for the first time in their attempt to get rid of their image of tax haven.
Other notable data from the Corporate Tax Paradise Index is that African countries are responsible for 4% of the risks of corporate tax abuse; Latin American countries 3%. Regional corporate financial activity is even more concentrated in Mauritius.
Brazil has the biggest deterioration in its score among Latin American countries and becomes more vulnerable after adopting weaker OECD standards.
In its report, Tax Justice Network stresses that the United Kingdom has strengthened its own defences against global corporate tax abuse, and that is why after the last two years the country has tried to “male” the efforts of countries at the UN to protect itself from tax havens.
The biggest difference between the countries that improved and those that worsened their ranking in the last index update is due to the lack of royalty standards and service fees.
The exploitation of royalty payments to pay less taxes was a key component of the notorious tax abuse scheme Double Irish, Dutch Sandwich used in the past by some of the largest multinational corporations – including Google, Facebook, Coca-Cola and Pfizer to pay less billions of dollars in taxes.
Some of the biggest improvements in royalty and service fees standards were observed in Belgium, Denmark, Italy and Portugal. On the other hand, the countries that rose in the ranking tended to have weakened their laws against this particular technique of corporate tax abuse. Some of the worst deteriorations were observed in Brazil, Poland and Mexico.
This article has been translated after first appearing in La Estrella