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The ‘Axis of Avoidance’

04 June 2019

When it comes to multinational corporate tax the UK (and its overseas corporate tax network), the Netherland, Luxembourg and Switzerland have become the ‘axis of avoidance’, says a damning new report.

Together, they are responsible for half the world’s corporate tax avoidance risk. So it’s hardly surprising these countries dominate the top of the latest Corporate Tax Haven Index produced by every two years by the Tax Justice Network.

It is estimated that governments around the world lose over US$500bn in tax each year due to these corporate tax havens, says the Tax Justice Network. The IMF thinks the figure is more like US$600bn!

The group feels the UK has much to answer for: “The UK, with its tax haven network, has single-handedly done the most to break down the global corporate tax system, accounting for a third of the world’s corporate tax avoidance risks.”

It said the UK effectively outsourced the corporate tax haven game to a ‘spiders web’ of Overseas Territories and Crown Dependencies. Despite having powers to impose and veto law making they allow these territories to act with impunity.

The Tax Justice Network claims that these satellite tax havens represent “an extension of the City of London” financial centre. The half-in, half-out arrangement allows the City to benefit from often nefarious activities run out of these secretive jurisdictions, while allowing the government to maintain distance when scandals arise.

The Netherlands was found to be the second biggest contributor to avoidance after Britain, but was said to be accountable for around only 7% of the problem.

Corporate Tax Haven Index – 2019 Results

Ranks the world’s most important tax havens for multinational corporations, according to how aggressively and how extensively each jurisdiction contributes to helping the world’s multinational enterprises escape paying taxes, and erodes the tax revenues of other countries around the world. It also indicates how much each place contributes to a global ‘race to the bottom’ on corporate taxes, says the Tax Justice Network. Here are the worse offenders than:

1) British Virgin Islands*

2) Bermuda*

3) Cayman Islands*

4) Netherlands

5) Switzerland

6) Luxembourg

7) Jersey*

8) Singapore

9) Bahamas**

10) Hong Kong

11) Ireland

12) UAE

13) United Kingdom*

14) Mauritius**

15) Guernsey*

16) Belgium

17) Isle of Man*

18) Cyprus

19) China

20) Hungry

*Overseas Territories (OTs) and Crown Dependencies (S+CDs) of the United Kingdom where the Queen is head of state; laws must be approved in London

**British Commonwealth territories whose final court of appeal is the Judicial Committee of the Privy Council in London.

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