Osborne, Barclays, the Cayman Islands and tax avoidance


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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.

Simpsons-Cayman-Islands-tax-dodgerIndeed 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.

 


See also:

The real Mitchell tax scandal is DFID’s failure to stand up to Osborne 29 Mar 2012

The Treasury dodges the question on its new tax loophole for multinationals 7 Mar 2012

The Osborne tax get-out turns aid for the poorest into a subsidy for multinationals 6 Mar 2012


 

So why is the government so determined to make it even easier for Barclays to shift more of their profits out of poor countries?

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.

Yesterday, we delivered a petition of more than 33,000 signatures calling for the government to close tax loopholes to the Treasury. Labour has promised to lodge amendments to the finance bill legislation, and Department for International Development and Treasury shadows Rushanara Ali and Owen Smith, respectively, accepted a copy of the petition on behalf of the party.

Smith has complained that this isn’t the first time they’ve raised serious concerns over this issues with the government:

“In last year’s finance bill, Labour urged the government to provide a full impact assessment of the effect of the CFC changes on developing countries. In addition to repeating this call, we shall also be asking the government for assurances that the changes won’t cost jobs at home and won’t facilitate tax avoidance abroad.”

The finance bill will be debated in the House on Wednesday and Thursday. We’re hoping for cross party support for an amendment to asses and mitigate the impact of the rule changes on poor counties. With growing public discontent from supporters of all political parties, it’s vital the coalition government wakes up to the damage these changes could do to the developing world.

At a time when people are rightly demanding value for money from the British aid budget, making it easier for British multinationals to shift the profits they make into tax havens makes no sense whatsoever.

 


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  • Anonymous

    The main reason for using another jurisdiction for funds, is legal.

    If Barclays sets up a fund in the Caymen Islands, and Barclays goes bust in the UK, then there is no way the UK liquidator can get its hands on the funds. The Caymen Island’s legal system will say no.

    It’s standard practice for funds to be in separate legal jurisdictions from the companies setting them up for this reason.

    Now for tax evasion.

    How about proposing a “Get Ken” tax law where we retrospectively change the law to force Ken to pay lots of tax? After all, government has a track record of this. Nothing like targeting people in that way is there.

  • Selohesra

    Strange – I thought after 13 years of Labour Govt any abuses would have been closed down just leaving Cayman subs

  • Blarg1987

    Good idea, should also include current and former MP’s and PM’s of all political parties and groups and buisness people also, we are all in this togeather and some need to shoulder their share which they have not :).

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  • Anonymous

    we are all in this togeather

    ========

    Really? I presume that you’re in into together with all those people who rioted too? Collective guilt. Are you going to help them out and serve some of their sentence?

    My view is different. Peers and MPs aren’t in it, even though they are guilty. For example, take bankers. I want the likes of the bankers at RBS prosecuted and jailed. I want RBS liquidated along with all other banks who caused losses to the tax payer. I want the regulator dealt with in a similar manner. FSA, Bank of England and people in the Treasury (Gordon Brown was in charge of regulation). They should be forced to pay.

    Other than that, I’ve never been asked, I’ve not been involved, why should I pay for the mess caused by others without my consent?

    PS

    You’ve said the state pension isn’t a debt. I curious as to your thinking on that. e.g. If I give money to a bank to go into a savings account they owe that to me. It’s a debt. Why isn’t the state pension a debt when I give money to the state for my retirement?

  • Blarg1987

    I was being a little sarcastic on my previous comment implyingthose people should be paying more taxes that are due etc.

    The state pension is not a debt as it is covered by general taxation i.e. I pay taxes that goes to pay the state pension for someone else. It is not a case that the bank goes to the money markets to pay the state pension and has to pay the money back with interest.

    The return comes when we reach retirement in the form of the following generation paying, however one could say the taxes we pay to help fund young peoples health care and education is our investment and the state pension we are paying now if the return.

  • Anonymous

    Why should how the bank decides to pay back its debts, mean that its not a debt or that it is a debt?

    I’m quite aware of how the system works.

    Let me put it another way.

    If its not a debt, it doesn’t have to be paid. Is that your argument?

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  • Anonymous

    Left Foot Forward and straight into mouth…

    http://timworstall.com/2012/04/17/ignorant-fuckers-at-action-aid/

  • Blarg1987

    You ever considered that it is an investment?

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