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World leaders and tax dodging: an absence of will

29 August 2013 | By Joseph Stead

The 10-point Lough Erne communique contained 13 uses of the word ‘should’ and not a single use of the word ‘will’. 

Perhaps David Cameron, the UK Prime Minister, was hoping that no-one would notice the difference and that the British public anger about tax dodging would be satisfied without any actual action.

A new poll commissioned by Christian Aid shows that that gamble has failed and that the British public remain as angry, if not more so, than before the G8.

84% are angry about multinational companies avoiding tax

Public opinion

When a previous poll was undertaken in February, 80% of the public were angry about tax dodging, and 34% were boycotting products because of companies’ tax practices.  The same percentage are still boycotting products - and 84% are now angry. 

While one of the G8 ‘shoulds’ was for tax authorities to get more information from multinationals, the public are clear that they expect more.  Our ComRes poll found that 87% want multinational companies (MNCs) to be more transparent with their accounts

Both companies and government are seen as complicit in the problem, with 83% saying that MNCs get treated more leniently by the tax man, while 58% think that tax avoidance by MNCs is immoral.

Furthermore, despite the pre-G8 commitments made by the UK’s Overseas Territories and Crown Dependencies, there is also clearly a desire for further reform in UK-linked jurisdictions. 

Of the 2,028 Britons questioned, 74% agree with the statement that ‘the UK is responsible for these territories and should force them to make information about company ownership publicly available by using all available means.’

While I’d love to be able to say what the UK Government response to this will be, I can only point out what our poll suggests it should be.

Why is company ownership important?

Cameron made transparency of company ownership a key part of the G8, and it’s not hard to understand why.  The Africa Progress Panel highlighted how the use of anonymous companies registered in the British Virgin Islands (BVI) involved in just five mining deals in the Democratic Republic of Congo (DRC) cost the citizens of the DRC $1.35bn, or more than twice their annual health and education budget combined. 

As Kofi Anan, former UN Secretary General and head of the Africa Progress Panel said: ‘When foreign investors make extensive use of offshore companies, shell companies and tax havens, they weaken disclosure standards…such structures also facilitate tax evasion and, in some countries corruption, draining Africa of resources that should be deployed against poverty and vulnerability.’

Cameron himself agrees, saying much the same: ‘A lack of knowledge about who ultimately controls, owns, and profits from companies leads to aggressive tax avoidance, tax evasion and money laundering, undermining tax bases and fuelling corruption across the world’.

The public get it, too.  When asked why people might want anonymous companies, the leading answers were: for tax evasion and avoidance (78%), to hide their true wealth (70%) and to hide criminal behaviour (59%).

What is being done about it?

But having made company ownership transparency a key part of the G8, Cameron stopped short of doing what he wanted to. He said he personally supports a public register of the real owners of companies but when it came to the G8, he stopped just short of taking that step. 

He’s decided to have a consultation instead.  There is still a while to go before the consultation closes on 16 September, but the people we polled had a fairly clear view, with only 9% agreeing that the owners of companies have a right to privacy.

With the UK committed to establishing a registry, making it public should be a no-brainer, as some in the business world have agreed. The extra cost would be minimal. It would ensure that developing countries could access the information easily and quickly, without the need for treaties to allow exchange of information. It would allow many eyes to analyse the data to spot both areas of concern and errors. 

Knowledge that there would be many eyes would also deter many from even trying.  It would also help make banks perform due diligence both quicker and more effectively and would be a first step in building back trust and confidence in businesses. That, in turn, would support both access to credit and the rebuilding of some of the social trust that business has lost in recent years.

A cost-effective option

All of this the government knows, indeed it has known for years, because it did a comprehensive cost benefit analysis in 2002, which came out in favour of a public registry as the most cost-effective option. 

The public is also clear that the UK should extend requirements for public registries to the Overseas Territories and allow the citizens of the DRC to see who controls the BVI companies that have stolen their money.

So, public registries are something that the Prime Minister wants, something that many in businesses support, something that the public want, something that would benefit developed and developing countries alike and also a means to tackle corruption, tax evasion and money laundering.

That we should do this seems entirely clear. Whether the UK government will do it remains to be seen.

What you can do

Act now >Call on Vince Cable to ensure public registers are created, showing the real owners of phantom firms. Let's give tax dodgers nowhere to hide.



Find out more

Beneficial Ownership AudioBoo - Churches campaigns manager Al Roxburgh explains what beneficial ownership is, what the general public think about tax dodging, and how you can get involved in Christian Aid's tax justice campaign.

Read Rachel Baird's blog about beneficial ownership on the Huffington Post.

Joseph's blog also appeared on Tax Justice Network

 About the author

Joseph Stead - Christian Aid's economic justice adviser

Joseph Stead is Christian Aid's economic justice adviser.

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