Saturday

26th Sep 2020

EU tax havens under pressure as leaks go public

EU-linked tax havens have come under increased pressure to reveal who really owns what ahead of a meeting of leading world economies in Northern Ireland on Monday (17 June).

On Saturday, British Prime Minister David Cameron - the host of the G8 summit - announced that 10 British protectorates have agreed to create a registry of the owners of foundations, trusts and shell firms in their jurisdictions.

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  • British Virgin Islands: the EU says Offshore Leaks is the 'mai trigger' behind the crackdown (Photo: JaguarJulie)

The agreement applies to Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Anguilla, Montserrat, Turks and Caicos Islands, Jersey, Guernsey and the Isle of Man.

Cameron hailed the deal as a "very positive step forward."

"It is important we are getting our house in order. What the crown dependencies - places like Jersey and the Isle of Man, and the overseas territories, places like the Cayman Islands - have signed up to is basically the existing and the new standards for exchanging tax information. That is absolutely vital," he said after meeting delegates from the tax havens.

He added: "Let's be clear why this tax issue matters. If companies don't pay their taxes or individuals don't pay their taxes we all suffer as a result."

The British move is the latest in a series of EU and US efforts to clamp down on tax evasion.

The US in January brought into life a new law - Fatca - which obliges foreign bank accounts to declare assets held by US citizens.

The European Commission and EU leaders have also promised to create one of the toughest tax transparency regimes in the world by passing a new Savings Tax Law by the end of the year.

The developments come after a massive leak of data on secret bank accounts obtained by the US-based International Consortium of Investigative Journalists (ICIJ) under the tag Offshore Leaks.

The ICIJ project has led to scandalous revelations in Austria, Britain, France, Germany and the US.

Speaking to EUobserver in an interview earlier this month, EU tax commissioner Algirdas Semeta said ICIJ is part of a "perfect storm" of events which also includes the EU financial crisis.

But he said Offshore Leaks "could be identified as the most significant trigger" in the new crackdown.

He added: "It has created visibility of the issue and it has triggered political recognition of the amplitude of the problem. We're not talking about €100 billion or €200 billion here, but about €1 trillion."

For its part, Offshore Leaks ahead of the G8 event made part of its information publicly available in an online searchable database in order to keep the momentum going.

It allows people to search through more than 100,000 secret companies, trusts and funds created in exotic jurisdictions to winkle out cheats.

"The sheer scale of material the ICIJ has now placed into the public domain exposes how the financial system is being made to work against the interests of ordinary citizens throughout the world," Porter McConnell, the US-based chief of the Financial Transparency Coalition, a group of six pro-transparency NGOs, said on Friday.

He noted that tax havens should not only create registries of owners but should also open them up to public scrutiny.

"This issue must no longer be left only to journalists to monitor and expose," he added.

“We urge global leaders meeting in Northern Ireland to cut through the rhetoric and commit to fixing the wholesale inadequacy of our global financial system," he said.

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