Advocacy group the Tax Justice Network named the British Virgin Islands as the “most complicit” in helping companies pay less corporate income tax, followed by the Cayman Islands and Bermuda.
Traffic Analyzer | Digital Vision Vectors | Getty Images
The British overseas territories are the biggest enablers of corporate tax abuse globally, according to rankings by tax advocacy group the Tax Justice Network.
The British Virgin Islands is the “most complicit” region in helping multinationals pay less corporate income tax, followed by the Cayman Islands and Bermuda, according to TJN’s latest update Corporate Tax Haven Index earlier this month.
“The UK and its network of British tax havens (often referred to as the UK’s ‘Second Empire’) now bear a third (33%) of all corporate tax abuse risks measured by the index,” a TJN spokesperson told CNBC. .
Switzerland ranks fourth, followed by Singapore, Hong Kong and the Netherlands. Number eight on the list is the self-governing British territory of Jersey, while the UK itself is ranked 18th.
TJN estimates estimated losses to other countries from the UK and its UK tax havens $84 billion in corporate taxes each year.
Some government spokesmen defended themselves against the advocacy group’s accusations, saying they fully complied with international tax standards set by the Organization for Economic Co-operation and Development.
The UK government’s Foreign, Commonwealth and Development Office told CNBC that the UK has always complied with common reporting standards Approved by the Organization for Economic Cooperation and Development (OECD) in 2014.
CRS aims to increase transparency on tax matters worldwide and allow tax authorities to reveal taxpayers’ income and assets held overseas.
The FCDO told CNBC that as of the end of 2022, more than 100 countries had shared CRS information with them, with a total of more than 9.2 million accounts reported.
The agency added that Crown Dependencies and Overseas Territories are separate jurisdictions with their own democratically elected governments responsible for their financial affairs.
spokesman British Virgin Islands FinanceThe group, which calls itself “the voice of the British Virgin Islands’ financial services industry,” told CNBC that the territory adheres to global standards, participates in the Global Tax Transparency Initiative under the OECD, and fully cooperates with the British government and law enforcement agencies to share “relevant” information.
The Cayman Islands and Bermuda government tax authorities did not respond to CNBC’s inquiries.
The British Virgin Islands, Cayman Islands and Bermuda are currently rated “harmless”.
TJN, find out about standards like CRS Because it’s not enough to cope with tax avoidance and Fraudsupports efforts by the United Nations to take over oversight of international tax policy.
In August, the United Nations announced a blueprint Develop a universal tax agreement to promote inclusive and effective international tax cooperation.
The broad commitments in the guidance include fair taxation by multinational enterprises, addressing tax evasion and avoidance by high net worth individuals, and effectively preventing and resolving tax disputes.
The total number of United Nations member states is 110 voted in favor 44 abstained and only 8 countries voted against, including the UK.
TJN Belly Accused UK of double standards as tThe country has strengthened its defenses It has spent the past few years campaigning against global corporate tax avoidance while voting against United Nations treaties.
Other countries opposed to the UN initiative include the United States, Australia, Canada, Israel, Japan, New Zealand and South Korea.
According to TJN, the world may lose If the OECD remained the global tax regulator, $4.8 trillion would be funneled to tax havens over the next 10 years. A TJN spokesman said the United Nations tax convention was the best way in the world to avoid such losses.
The OECD is currently pursuing its own policies aimed at better tackling tax avoidance – global minimum tax The deal will impose a minimum effective tax rate of 15% on large multinational companies.
TJN Methodology—and Resistance
To determine the rankings, TJN evaluated a country’s tax code based on 18 indicators, including minimum corporate tax rates, tax exemptions and how aggressive a country’s tax treaties are with other countries.
This is the country’s “safe harbor score”, which is designed to assess the “wiggle room” businesses have for tax abuse. The British Virgin Islands, Cayman Islands and Bermuda scored worst across all 18 indicators.
TJN then measured how much financial activity multinational corporations conducted in and out of the country.
“This means the index ranks corporate tax havens based on how harmful they actually are to other countries, not just in theory,” a TJN spokesman said.
The Corporate Tax Haven Index has been european parliament and European Commissionas well as international organizations such as united nations human rights council and Oxfam.
However, tax experts such as Niels Johannessen, director of the Center for Business Taxation at Oxford University, disagree that the index is an accurate measure of tax avoidance.
Johannesen told CNBC that while TJN’s research is reliable for determining which countries have adopted what legal measures against international tax avoidance, he doubted the index’s credibility in measuring the extent to which a jurisdiction promotes tax avoidance.
“A more meaningful indicator is where (multinational companies’) diverted profits are registered. The best academic research on this focus points to Bermuda and the Caribbean jurisdictions as being equally important, but countries such as Ireland are estimated to receive less diverted profits than this Three countries more.
Meanwhile, Leopoldo Parada, associate professor of tax law and co-director of the Center for Business Law and Practice at the University of Leeds, questioned the inclusion and framing of TJN’s hedging score indicators, such as the minimum corporate income tax.
“All countries use different tools to compete to attract investment. Some have infrastructure, some have better technology or cheap labor… Countries with less competitive advantages in certain areas tend to offer other options, including very Low corporate income tax rates and other aspects of the tax system,” Parada said.
“It’s not just that because a country has a very low corporate income tax rate, we should automatically assume that a country is open to tax evasion… the country is just willing to pay the price.”
