September 26, 2020

Cayman Islands mentioned in BBC TV programme on tax avoidance


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British Chancellor George Osborne

A recent BBC “Panorama” TV programme showed how giant multinationals, like Glaxo SmithKline are using overseas subsidiaries to avoid paying millions in pounds in tax.

And instead of clamping down on it, British Chancellor George Osborne is relaxing the rules to make the shifty manoeuvre easier to perform. The pre-existing rules also protected the tax payable by British companies in developing countries.

As ActionAid’s Chris Jordan wrote on Left Foot Forward:

Changes to obscure sounding ‘Controlled Foreign Company (CFC) rules’ – debated in Parliament this week – could give the green light for Barclays and other large British multinationals to increase their use of tax havens like the Cayman Islands to dodge their taxes in the developing world.

Despite the rhetoric about cracking down on “morally repugnant” tax avoidance, George Osborne seems happy to turn a blind eye where poor countries are concerned; while the IMF, OECD, UN and World Bank all recommend an impact assessment – to highlight where the greatest damage will be done – so far the Treasury refuses to do so.

In evidence submitted to Parliament’s Treasury select committee last year, Barclays said the “majority” of its Cayman Islands companies were:

“…managed and controlled in the UK and are therefore subject to tax in the UK… under the UK CFC legislation.”

It is likely some of these tax haven companies that are currently covered by the CFC (anti-tax haven) rules will be exempted after the changes. ActionAid estimates developing countries could lose £4 billion a year if these changes make it onto the statue book.

Osborne, Barclays, the Cayman Islands and tax avoidance

By Chris Jordan, tax justice campaigner at ActionAid

This week the Telegraph revealed Barclays has twice as many subsidiary companies registered in the Cayman Islands than Lloyds and RBS combined.

Indeed ActionAid’s own research shows Barclays has more Cayman Islands subsidiaries than any other FTSE 100 company; Barclays has regularly been embroiled in accusations of tax avoidance, most recently by the Treasury who took retrospective action to close a loophole worth £500 million a year to the company.

Barclays has huge and growing operations in the developing world. Last year it declared almost £1 billion of its £5.9 billion profit were made in Africa. This should be good news for developing countries, which need to increase their tax revenues to invest in their teachers, doctors and much needed infrastructure.

Eventually it’s these efforts that will enable them to become independent of international aid. But the OECD estimates developing countries lose three times more to tax havens than they receive in aid each year.

Left Foot Forward (LFF) is a left-wing political blog in the UK, established in 2009 it was created and edited by Will Straw, the son of Alice Perkins and Jack Straw, until December 2010.[2] Straw was succeeded by Shamik Das, the current editor.[3]

The site is part of a cohort of British left-wing blogs which have attracted significant interest from the media.[4] LFF has been described as “an increasingly influential left-leaning blog” by the [[Financial Times],[5] “The place to start the hunt for intelligent views and news about the centre left” by the Observer[6] and “undoubtedly an influential and serious operation” by the Independent on Sunday.[7]

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