It’s been hard to miss the Panama Papers this week. History’s biggest data leak shows the super-rich and multinational corporations exploiting secretive offshore tax havens on a quite extraordinary scale.
For over 40 years a single law firm, Mossack Fonseca, set up more than 200,000 shell companies for the rich and powerful, in places where their financial affairs could be cloaked in secrecy, out of reach from tax authorities and regulators. At the peak of its activity in 2005, Mossack Fonseca incorporated more than 13,000 companies – that’s one company every 10 minutes.
The leaks released this week are just the tip of the iceberg. Until researchers dig into the 11.5m documents drawn from Mossack Fonseca’s internal database, we won’t have more of the story. And even then, we won’t have the full story. Mossack Fonseca aren’t the biggest or the second-biggest provider of offshore services globally – they’re the fourth biggest.
Corruption isn’t confined to a single continent. It’s a problem everywhere, although the financial cost of this corruption disproportionately falls on developing countries. We know that tax havens are at the heart of the growing inequality crisis. They’re estimated to cost poor countries at least $170bn in lost tax revenues each year. That’s money which could be spent ending poverty.
To give just one example, the Panama Papers show an oil company paid Mossack Fonseca to help it avoid US$400 million in taxes in Uganda. This is more than the entire Ugandan health budget.
The leak clearly shows the central role of UK-linked tax havens in the global network of tax havens. More than half the companies exposed in the leaks are registered in UK-governed tax havens, or overseas territories and crown dependencies.
Four of the 21 tax havens exposed in the Panama leaks are UK-linked. One of the four UK-linked tax havens, the British Virgin Islands, is home to 50% of secret firms (around 113,000 in total) leaked in the Panama Papers. This leak confirms a World Bank study showing UK overseas territories as the most popular place to set up anonymously-owned companies.
The UK Government has an important role to play in the international campaign against tax havens. We’ve been calling on David Cameron to force the UK overseas territories and crown dependencies to get serious about the wealthy individuals and corporations avoiding paying their fair share. He has the perfect opportunity on 12 May when he hosts an international Anti-Corruption Summit in London.
At a previous summit that David Cameron hosted – the G8 in Northern Ireland in 2013 – he called for a global crackdown on offshore tax havens. The summit secured a commitment from overseas territories and crown dependencies to consult on creating ways for the public to see who really owns and benefits from a company.
Three years later, and following the Panama Leaks, these territories need to set out their own timetables for introducing public registries of beneficial ownership. Then wealthy individuals would no longer be able to hide away money in the UK’s financial secrecy network.
To get the message across, we need as many MPs as possible calling on the Prime Minister to put tax on his summit agenda and ensuring the overseas territories and crown dependencies take part. You can get involved now by emailing your MP and asking them to build on the pressure created by the Panama Leaks. It’s time for the UK government to end the era of tax havens once and for all.