Offshore belastingontwijking in het Verenigd Koninkrijk, de rijken winnen, de armen verliezen. Open brief aan King Charles door Tax Justice Network

Civis Mundi Digitaal #134

door Michel van Hulten

Op 30 april 2023 plaatste The Guardian een ‘Open Brief aan Koning Charles III’ en liet die brief vergezellen door een toelichtende tekst met 16 voetnoten verwijzend naar andere/eerdere publicaties ter staving van wat nu door Tax Justice Network extra onder de aandacht wordt gebracht. En dat is niet gering. Een van de openingszinnen van deze ‘open brief’ stelt immers al: 
‘The UK, the Crown Dependencies and the British Overseas Territories are collectively responsible for facilitating nearly 40 per cent of the tax revenue losses that countries around the world suffer annually to profit shifting by multinational corporations and to offshore tax evasion by primarily wealthy and powerful individuals. This makes the UK and its network of satellite tax havens the world’s biggest enabler of  the UK and its network of satellite tax havens the world’s biggest enabler of global tax abuse.’ En even verderop: ‘offshore tax abuse costs the world almost half a trillion dollars each year’ en daarna: “… the biggest non-violent threat in the world to human rights.” Het eigen aandeel van Koning Charles III wat betreft belastingontwijking blijft daarbij niet onbenoemd. Ik vind het onbegrijpelijk dat deze brief voor zover ik heb kunnen nagaan, de Nederlandse pers en andere media niet gehaald heeft. Weten al die redacties niet van dit feit of gaan ze ervan uit dat hun lezers, toehoorders en kijkers voor dit onderwerp geen belangstelling hebben?
                

De toelichtende tekst bij de brief

An open letter1 sent to King Charles by the Tax Justice Network and published today (30 April 2023) in the Guardian warns the King ahead of his coronation of the “heavy financial and human costs” inflicted on “ordinary people in the UK, the Commonwealth, and around the world” by the British tax havens over which King Charles is sovereign.

“The financial regulations of Your Majesty’s jurisdictions,” Tax Justice Network chief executive Alex Cobham writes, “pose the biggest non-violent threat in the world to human rights.”
As countries gear up for negotiations for a new UN leadership role on global tax rules – potentially the biggest tax shake up of the modern era2 – the Tax Justice Network is urging King Charles to let his voice “be heard in this global discussion that will echo throughout history”.
The UK, the Crown Dependencies and the British Overseas Territories are collectively responsible for facilitating nearly 40 per cent of the tax revenue losses that countries around the world suffer annually to profit shifting by multinational corporations and to offshore tax evasion by primarily wealthy and powerful individuals. This makes the UK and its network of satellite tax havens the world’s biggest enabler of global tax abuse.3
“Our latest estimates,” the Tax Justice Network states in letter, “put the sum of this tax loss imposed upon the world by British tax havens at over US$189 billion a year, which is more than three times the humanitarian aid budget the UN requested for this year”.

If the global tax losses caused by British tax havens, often referred to as Britain’s “second empire”, were reversed, research by the University of St. Andrews and University of Leicester estimates that 12.6 million people would gain access to basic sanitation, and 1.2 million children would be able to attend school for an extra year. These positive impacts would in turn have a knock-on impact of reducing child mortality, saving the lives of over 220,000 children under the age of five over the next decade.4

The UK also suffers from the lose-lose game of tax havenry, the open letter warns. “We estimate the UK itself loses at least US$52 billion in tax annually to global tax abuse, which is equivalent to losing the annual wages of over 1 million NHS nurses every year to multinational corporations and wealthy individuals underpaying tax in the UK.”5

The letter also takes to task Prime Minister Rishi Sunak’s “most damaging” reneging, during his time at the Treasury, on commitments to corporate tax transparency made by David Cameron’s government. As Chancellor, Sunak u-turned in 2020 on requiring multinational corporations to publish their country by country reports – a legal power the UK became the first country in the world to adopt in 2016 but has to date not exercised once. Exercising this power, which the Tax Justice Network considers to be one of the “most powerful transparency tools available to governments” can recover at least £2.5 billion in corporate tax every year that is otherwise being lost to tax havens.6

Calling back to the King’s comments in his first Christmas message7 on the “great anxiety and hardship” of those struggling to “pay their bills and keep their families fed and warm”, the Tax Justice Network writes: “It is difficult in this context of current economic hardship to understand why Your Majesty’s Treasury is leaving the option to recover £2.5 billion in tax from corporate tax abusers on the table and instead opting to require millions of hard working people to pay more tax on their incomes under the frozen income tax personal allowances.”

 A copy of the open letter was also sent to the Prime Minister, who the Tax Justice Network cc’d in the letter.

“The UK is now standing in the way of the march of progress,” the Tax Justice Network writes. The UK has already expressed opposition to and attempted to thwart negotiations on moving rulemaking on global tax rules away from the OECD, a club of rich countries where rulemaking has sat for the past sixty years, and to the globally inclusive UN.8 The UK is expected to attempt to block negotiations from succeeding.

The package of policy reforms9 envisioned under a UN tax leadership role has long been championed by leading economists and campaigners as overdue root-and-branch solutions to ending rampant global tax abuse and to protecting the taxing rights of countries and their people. The package consists of policies that the OECD has either long resisted or has failed to effectively deliver over the past decade due to the oversized influence of OECD members like the US and Switzerland at the OECD, and of corporate interest lobbyists.10

The letter connects the UN negotiations to King Charles’ statements11 last year to the Commonwealth in which the monarch said we “must find new ways to acknowledge our past” and expressed his desire to deepen his understanding of the enduring impacts of slavery and other aspects of colonial violence and extraction.

British tax havens like the Cayman Islands and Bermuda, the Tax Justice Network writes, were encouraged down the route of tax havenry by the UK after the 1950s and remain an “unresolved legacy” of British colonialism.12 “These tax havens continue to disadvantage their own inhabitants as well as some of the poorest people globally – and of course the people of the UK,” the Tax Justice Network writes.

“Rather than beginning to pay reparations for the violence, enslavement and extraction of the British empire,” the letter continues, “the UK’s ‘second empire’ is continuing to add to the debts that we owe. The scale of that debt is almost certainly unpayable. At a minimum, however, the time has surely come to stop the clock running.”

Lastly, the Tax Justice Network commended the example made by the King by committing to voluntarily pay income tax, which the late Queen had also done. The Tax Justice Network invited King Charles to set a further example by encouraging his enterprises to seek the Fair Tax Mark accreditation, a British-run international accreditation scheme considered to be “the gold standard of responsible tax conduct” for businesses and organisations.13

Corporate tax avoidance topped the UK public’s list of concerns in 2022 for the tenth consecutive year in a poll by the Institute for Business Ethics.14 Asked what issues most need addressing in their view of company behaviour, the British public put corporate tax avoidance above bribery and corruption, and above environmental responsibility and worker exploitation. In another 2022 poll by the Fair Tax Foundation, which runs the Fair Tax Mark scheme, three quarters of respondents reported they would rather shop with, or work for, businesses that can prove that they are paying their fair share of tax.15

King Charles and the British monarchy have several times come under scrutiny in the press in the past over the monarchy’s and the then Prince’s use of tax havens and over questions of tax avoidance.16

“Bringing full financial and tax transparency to the monarchy offers a path for Your Majesty to provide a powerful impetus for good,” the Tax Justice Network writes.

Notes

  1. The open letter is published on the Tax Justice Network website here. Read the Guardian article on the letter here.
  2. Read more about negotiations on a new UN leadership role on global tax here.
  3. See the Tax Justice Network’s State of Tax Justice 2021 for more information on the UK’s role in global tax abuse.
  4. The research by the University of St Andres and University of Leicester is available here. For more on the GRADE analysis used in the study and on the link between tax justice and human rights, see our report here.
  5. UK tax loss figures from the Tax Justice Network’s State of Tax Justice 2021. Average UK nurse salary based on latest data (2020) submitted by the UK to the OECD on renumeration of health professionals.
  6. More information available here on the UK’s reneging on public country by country reporting and the estimated tax revenues missed out on as a consequences. On a related note, Australia last month made a major breakthrough in adopting public country by country reporting, going beyond the UK’s 2016 legislation on the matter.
  7. Full text of King Charles’ Christmas address available here.
  8. Read more here about last year’s unprecedented but ultimately failed efforts to stop a resolution for negotiations on a UN tax leadership role from coming to the UN General Assembly.
  9. For more information, read the high-level UN FACTI panel’s report here.
  10. For more information on the OECD’s failure to deliver the mandate instructed to it by the G20 to reform global tax, read the Tax Justice Network’s 2022 open letter to the G20 here.
  11. Full text of King Charles’ speech to the Commonwealth is available here.
  12. For more information on this history, see the Michael Oswald’s documentary “The UK’s Spider Web: Britain’s second empire”.
  13. More information about the Fair Tax Mark here.
  14. The Institute of Business Ethic’s Attitudes of the British Public to Business Ethics 2022 poll is available here.
  15. Read about the Fair Tax Foundation’s poll here.
  16. See Mirror ‘Prince Charles has millions in off-shore tax havens: Royal is latest to be dragged into Paradise Papers cash scandal’ (2017); BBC ‘Paradise Papers: Queen’s private estate invested £10m in offshore funds’ (2017); BBC ‘MPs question Prince Charles estate’s tax arrangements’ (2013); ‘Prince Charles’s £700m estate accused of tax avoidance’ (2012).

 

The full text of the open letter

Sir,
At the Tax Justice Network, we believe our tax and financial systems are our most powerful tools for creating a just society that gives equal weight to the needs of everyone. As we celebrate our twentieth anniversary this year, we note the change of era reflected by Your Majesty’s coronation. We hope this can mark a pivotal moment to address the heavy financial and human costs borne by ordinary people in the UK, the Commonwealth, and around the world, due to the UK and its network of tax havens over which Your Majesty is Sovereign.

I salute Your Majesty’s statements to the Commonwealth nations last year that we “must find new ways to acknowledge our past” and warmly welcome the desire expressed to deepen Your Majesty’s own understanding of the enduring impacts of slavery and other aspects of colonial violence and extraction.

Many of today’s British ‘satellite tax havens’ are an unresolved legacy from that time, having been facilitated to develop as financial and secrecy centres as the British Empire began to change in the 20th century. These tax havens continue to disadvantage their own inhabitants as well as some of the poorest people globally – and of course the people of the UK.

We believe Your Majesty can help by pointing the way to end one of the world’s most enduring injustices. The UK, the Crown Dependencies and the British Overseas Territories are collectively responsible for facilitating nearly 40 per cent of the tax revenue losses that countries around the world suffer annually to profit shifting by multinational corporations and to offshore tax evasion by primarily wealthy and powerful individuals. This makes the UK and its network of satellite tax havens the world’s biggest enabler of global tax abuse. Our latest estimates from the State of Tax Justice report put the sum of this tax loss imposed upon the world by British tax havens at over US$189 billion a year, which is more than three times the humanitarian aid budget the UN requested for this year.

The UK also suffers from the lose-lose game of tax havenry. We estimate the UK itself loses at least US$52 billion in tax annually to global tax abuse, which is equivalent to losing the annual wages of over 1 million NHS nurses every year to multinational corporations and wealthy individuals underpaying tax in the UK.

Research shows that it is the largest multinational companies and the wealthiest households that are responsible for almost all of this tax abuse. The effect is not only to strip away funding for desperately needed public services. It also undermines smaller local businesses, forcing them to compete on an unlevel playing field against larger rivals paying unfairly low taxes.

These abuses make the tax system much less progressive than legislated rules would imply. It results in society being scarred by needlessly deep, overlapping inequalities for women, racialised groups and disabled people especially.

Global tax abuse is aptly described by the former Prime Minister of Niger Ibrahim Mayaki and the former President of Lithuania Dalia Grybauskaitė, in a foreword to the UN High Level Panel Report on International Financial Accountability, Transparency and Integrity, as a “double theft”: it robs people of billions in public funds, and in doing so robs billions of people of a better future.

This is particularly true for lower income countries, which are hit hardest by global tax abuse. While higher income countries lose more tax in monetary terms, their tax losses represent a smaller share of their revenues – an estimated 9.7 per cent of their collective public health budgets. Lower income countries in comparison lose less tax in monetary terms, but their losses are equivalent to nearly half (48 per cent) of their collective public health budgets.

Many lower income countries which bear the greatest brunt of Britain’s network of tax havens – what has been called “Britain’s second empire” – are already dealing with the economic and environmental legacies of Britain’s colonial empire.

There has been growing consensus in recent years that global tax abuse robs states of the resources to fulfil their obligation as duty bearers of human rights. Curbing global tax abuse and illicit financial flows is defined as one of the UN’s Sustainable Development Goals for 2030. Earlier this year, the UN Committee on the Rights of the Child called on Ireland to “ensure tax policies do not contribute to tax abuse by companies registered in the State party but operating in other countries, leading to a negative impact on the availability of resources for the realization of children’s rights in those countries.”

It brings me no pleasure to highlight to Your Majesty, as the Head of State and Sovereign of the Crown Dependencies and Overseas Territories, that the British Virgin Islands, Cayman Islands, Bermuda and Jersey all rank above Ireland on the Corporate Tax Haven Index 2021, our ranking of jurisdictions most complicit in helping multinational corporations underpay corporate tax. Ireland ranks 11th and is immediately followed by the Bahamas in 12th and the United Kingdom in 13th. Regrettably, the financial regulations of Your Majesty’s jurisdictions can be arguably said to pose the biggest non-violent threat in the world to human rights.

If the global tax losses caused by the UK, Crown Dependencies and British Overseas Territories were to be reversed, research by the University of St. Andrews and University of Leicester estimates that 6.4 million people in lower income countries would gain access to basic drinking water, 12.6 million would gain access to basic sanitation, and 1.2 million children would be able to attend school for an extra year. These positive impacts would in turn have a knock-on impact of reducing child mortality, saving the lives of over 220,000 children under the age of five over the next decade.

In 2013, the Tax Justice Network’s founder and former economic adviser to the States of Jersey, John Christensen, wrote a letter to Her Late Majesty The Queen, detailing how the UK and its jurisdictions ranked high on the 2013 edition of the Financial Secrecy Index. The index is a ranking of countries most complicit in helping individuals hide their finances from the rule of law. Since then, the UK has only worsened its ranking on the index from 21st in 2013 to 13th in 2022. While successive editions of our Financial Secrecy Index show that the world is successfully curbing financial secrecy, the UK sticks out as one of the few backsliders who are dramatically increasing their supply of financial secrecy to the world.

In 2015 and 2016, the Government showed true leadership in this arena by becoming the first nation to adopt a public beneficial ownership register and the first nation to adopt the legal power to require multinational corporations to publish their public country by country reports. The Tax Justice Network was among the first to campaign for these measures as far back as 2003. We consider these measures to be among the most powerful transparency tools available to governments for dispelling the financial secrecy that enables tax evasion, money laundering and corruption, and for exposing the profit shifting that enables corporate tax abuse. On the global stage, the then Chancellor of the Exchequer The Rt Hon George Osborne encouraged the EU and members of the OECD to follow in the UK’s example on transparency.

Sadly, Your Majesty’s Government has since back-pedalled on this progress. The deadline for the Crown Dependencies and Overseas Territories to establish public beneficial ownership registers was pushed back, with recent statements by officials now hinting that the jurisdictions may never establish the registers. Jersey has even introduced a new form of anonymous ownership vehicle this year.

But perhaps most damaging is His Majesty’s Treasury’s public reneging in 2020, under then Chancellor of the Exchequer The Rt Hon Rishi Sunak, on the commitment to require public country by country reporting. To date, His Majesty’s Government has not once exercised the legal power it continues to enjoy under the Finance Act 2016 to require multinational corporations to make public their country by country reports. With our allies at Tax Justice UK, we have estimated that exercising this legal power can recover at least £2.5 billion in corporate tax every year for His Majesty’s Government that is otherwise being lost to tax havens. The EU and Australia are moving ahead to increase transparency in this area while the UK remains resolutely opaque.

The overall effect is that the UK’s network of tax havens over which Your Majesty is Sovereign continues to facilitate cross-border tax abuse and other illicit financial flows at global expense. Rather than beginning to pay reparations for the violence, enslavement and extraction of the British empire, the UK’s “second empire” is continuing to add to the debts that we owe.

The scale of that debt is almost certainly unpayable. At a minimum, however, the time has surely come to stop the clock running. That means reversing the policies that support financial secrecy and profit shifting, and keep the UK’s “second empire” as the most damaging actor globally.

In addition, the UK has a responsibility to jurisdictions that make up its network of tax havens – many of which were encouraged down the road of tax havenry since the 1950s by UK officials and policymakers, on the basis that this would reduce the need for official aid and generate financial flows to support the City of London. Leading economists and campaigners from around the world who gathered at a conference we hosted last year on ‘The UK’s role in tax as a tool for racial justice’ spoke of the importance of the UK committing significant funding now, in respect to the legitimate claim for reparations and to support the pursuit of alternative, and less harmful economic models.

Ending our role in tax abuse would benefit the people of the UK too. Your Majesty spoke in the Christmas message last year of the “great anxiety and hardship” for those struggling to “pay their bills and keep their families fed and warm”. It is difficult in this context of current economic hardship to understand why Your Majesty’s Treasury is leaving the option to recover £2.5 billion in tax from corporate tax abusers on the table and instead opting to require millions of hard working people to pay more tax on their incomes under the frozen income tax personal allowances.

Your Majesty’s Treasury also continues to underfund tax enforcement measures, even though the evidence shows that each £1 spent here will bring in a further £8 in revenues – simply by improving the compliance of the highest earners who currently enjoy impunity. It is a sad indictment of the triumph of ideology over evidence that the UK loses nine times as much to tax fraud as it does to benefits fraud, but dedicates more than three times as many staff to fighting benefit fraud. Research by TaxWatch UK also shows that the country pursues 23 times as many criminal prosecutions of benefits fraud as of tax fraud.

Internationally, the UK is now standing in the way of the march of progress. In a historic moment in November last year, the countries of the world unanimously adopted a resolution at the UN General Assembly to begin negotiations on establishing a new UN role on monitoring and setting global tax rules. These negotiations have the potential to herald in a new era of economic justice, where for the first time in history, our global tax rules are discussed and decided in a democratic and open forum at the UN.

For the past sixty years, global tax rules have been set by a small club of rich countries at the OECD, many of which like the Switzerland and the UK, are the world’s biggest facilitators of global tax abuse. A now decade-long attempt by the OECD to reform global tax abuse has failed to deliver.

For the majority of the world, moving rulemaking on global tax to the UN will create the opportunity for full sovereignty over their taxing rights for the first time since their independence. For the people of OECD member countries too, including the UK, the move will re-establish the scope for genuinely fair taxation by providing transparency and public accountability over their taxing rights, which their governments have often traded away behind closed doors at the OECD where corporate lobbyists and tax havens have long exercised oversized influence.

Worryingly, Your Majesty’s Government has already attempted to thwart these negotiations and prevent the move to the UN. The UK, the OECD and other rich nations applied unprecedented diplomatic pressure last year to prevent the resolution from coming to a vote. The UK voiced its opposition to the negotiations at the UN General Assembly last year and it is widely expected that the UK will leverage its weight to block negotiations from succeeding.

Our hope is that these negotiations will succeed and bring about a UN tax convention that delivers the policy solutions long called for by leading economists, campaigners and communities to truly end global tax abuse. To end the double theft of livelihood and future that multinational corporations and wealthy individuals have exacted on the world – and have done so to a great extent by leveraging the laws and financial systems of the nations and territories Your Majesty reigns over.

These negotiations mark a crossroad in history for people all around the world, for our planet and for future generations. At moments like this in history, people have looked to the Royal Family for guidance, for example and for hope. I urge Your Majesty to let Your Majesty’s voice be heard in this global discussion that will echo throughout history.

Lastly, I wish to commend the example Your Majesty has made by committing to voluntarily pay income tax, as did Her Late Majesty the Queen; and to note, in the span of Your Majesty’s charitable work, The Prince’s Responsible Business Network Business in the Community for its role in promoting responsible business practices, workplace equality, equal parental leave and just climate transition.

Along similar lines, Your Majesty may be interested in the work of the Fair Tax Foundation, a pioneering British organisation that manages the Fair Tax Mark, a robust and independent accreditation scheme for businesses that is often referred to as “the gold standard of responsible tax conduct”. The Fair Tax Mark has been tremendously successful in inspiring British businesses and initiatives to exercise and be proud of paying the right amount of tax, at the right time, in the right place.

The ranks of the Fair Tax Mark accredited now include some of the UK’s biggest employer, such as the Co-operative Group, Richer Sounds, the Timpson Group, Scottish Water and Dŵr Cymru/Welsh Water as well as FTSE 250 companies SSE, Pennon Group PLC, MJ Gleeson and The Watches of Switzerland Group.

The Fair Tax Mark recently became an internationally available accreditation, bringing this British badge of honour and ingenuity to the world. German, Italian and Danish multinational corporations have now attained the accreditation.

Corporate tax avoidance topped the UK public’s list of concerns in 2022 for the tenth consecutive year in a poll by the Institute for Business Ethics. Asked what issues most need addressing in their view of company behaviour, the British public put corporate tax avoidance above bribery and corruption, and above environmental responsibility and worker exploitation. In a poll by the Fair Tax Foundation in the same year, three quarters of respondents reported they would rather shop with, or work for, businesses that can prove that they are paying their fair share of tax.

Given the inspiring work of the Fair Tax Mark and the overwhelming support among the British public for the tax conduct the Fair Tax Mark celebrates, I wish to invite Your Majesty to consider once again setting another commendable example by encouraging Your Majesty’s enterprises to seek the Fair Tax Mark accreditation.

Tax is our social superpower. Instead of living short, harsh and solitary lives, tax allows us to organise to create the potential for a state with both the ability and the accountability to support progress for us all.

The social contract is at risk when overlapping inequalities are stark; when the origins of much wealth are in question; and when the tax compliance of the highest-income households is demonstrably poor. Bringing full financial and tax transparency to the monarchy offers a path for Your Majesty to provide a powerful impetus for good.

 

With best wishes,

Alex Cobham
Chief Executive
Tax Justice Network

cc The Rt Hon Rishi Sunak MP Prime Minister
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The author

Alex Cobham

Alex Cobham is an economist and chief executive of the Tax Justice Network. He is also a founding member of the steering group of the Independent Commission for the Reform of International Corporate Taxation, and of the technical advisory group for the Fair Tax Mark. His work focuses on illicit financial flows, effective taxation for development, and inequality. He has been a researcher at Oxford University, Christian Aid, Save the Children, and the Center for Global Development, and has consulted widely, including for UNCTAD, the UN Economic Commission for Africa, DFID, and the World Bank. He recently published two books: The Uncounted (Polity Press), and Estimating Illicit Financial Flows: A Critical Guide to the Data, Methodologies, and Findings, with Petr Janský (Oxford University Press, open access).