Frances Ball 29 May 2019 11:54am

UK accused of leading "axis of avoidance"

Research published by the Tax Justice Network (TJN) today has highlighted the UK as a global jurisdiction that is "most responsible for the breakdown of the global corporate tax system"

The Corporate Tax Haven Index said the UK bears "the lion's share of responsibility through its controlled network of satellite jurisdictions" - four of which featured among the 10 countries or territories that do the most to "proliferate corporate tax avoidance".

It scored each country or territory by combining "the degree to which it enables corporate tax avoidance" with the scale of its corporate activity.

The British Virgin Islands topped the list, while Bermuda, the Cayman Islands, and Jersey all came in the top 10.

As measured by the Index, the UK is to blame for more than a third of the world's corporate tax avoidance risks - four times more so than the next greatest contributor, the Netherlands, which accounts for less than 7% of global corporate tax avoidance.

The TJN is calling for new rules that would tax corporations "where employees work, not where ledgers hide".

"These countries have aggressively undermined the ability of governments across the world to meaningfully tax multinational corporations.

"An estimated $500bn (£396bn) in corporate tax is dodged each year globally by multinational corporations - enough to pay the UN's under-funded humanitarian aid budget 20 times over each year," it added.

Alex Cobham, chief executive at the TJN, called the hypocrisy of the wealthy countries in the list "sickening".

"A handful of the richest countries have waged a world tax war so corrosive, they've broken down the global corporate tax system beyond repair. The UK, Netherlands, Switzerland and Luxembourg - the Axis of Avoidance - line their own pockets at the expense of a crucial funding stream for sustainable human progress," he said.

Over 40% of foreign direct investments reported by the IMF, at a total value of $18trn (£14.2trn), are booked in these four countries.

As the TJN put it, the four have exposed international direct investments worth almost the entire economic output of the EU to "dangerous degrees of corporate tax avoidance risk".