“For companies to claim that they are morally in the right by having devised loopholes is ridiculous, even if their behaviour has been legal” (© Superstock)
It is amazing how much traction has been won by the drive to clamp down on corporate tax avoidance. I now expect more from the G8 gathering of world leaders, which opens in Lough Erne, Northern Ireland, on 17th June, than I did a year ago—or even a few months ago.
When I started working on corporate tax avoidance, on which I have been advising the UK government, it was just before last year’s disclosure that Starbucks paid very little tax in the UK, provoking public uproar. The company later made a contribution of £20m to the tax authorities. This single case made targeting corporate tax avoidance politically easier than it might have been.
Many governments among the G8—the United States, UK, Canada, France, Germany, Italy, Japan and Russia—now recognise that they are suffering from the lost revenue. France and Germany, perhaps prompted by cases of high-profile public figures revealed to be paying little tax, are keen to be seen to be doing something about it. African governments, who have suffered big time from corporate “transfer pricing,” a well-established method of avoiding paying tax, are also delighted that something is finally being done about it.
What has surprised me is that we have made progress on a front that initially seemed much harder—getting public disclosure from tax havens about the “beneficial ownership,” or ultimate ownership, of the shadowy shell companies used in money laundering manoeuvres. The British government has had a team working on this for several months. This is a long way from the prospect a year or so ago, when it seemed that the most we could hope for was “ascertainability of ownership”—jargon for the right of authorities, but not the public, sometimes to establish who really owned the companies.
A lot of tax-cum-secrecy havens have concluded that it is better to be seen to move first, than be told to do so. The Cayman Islands, followed by the rest of the Caribbean, and then Luxembourg, have offered some disclosure.
Since the UK government began to champion the cause of cracking down on avoidance, there have been two kinds of retorts from companies. One is that what the state requires them to…