By Anas Sarwar MP
As part of the Small Business, Enterprise and Employment Bill which Parliament is expected to approve today, the government is attempting to implement a public register showing who really owns companies. The bill is a good example of how UK legislation can affect countries around the world, especially those in the process of development.
The developing world loses around three times as much through tax avoidance and evasion as it gains through aid. Ending secrecy around who really owns companies is a vital part of fixing this, because many companies dodge taxes by hiding their identities using complex and secretive ownership structures.
The new register of who owns companies is an important reform which will make it harder for criminals to use companies as what Global Witness calls ‘get-away cars’ vehicles for corruption, money laundering, tax evasion, terrorist financing and so on – safe in the knowledge that there are no links to them personally.
Unfortunately, Mr Cameron has had far less success with the UKs Overseas Territories (OTs) and Crown Dependencies(CDs). Between $21 – $32 trillion in private financial assets is held in tax havens and of this, an estimated 25-30% is from developing countries.
The British Virgin Islands (BVI) in particular is known for creating firms whose real owners are untraceable so no surprise that BVI firms have turned up in the HSBC Swiss tax scandal, in the theft by Nigerian dictator Sani Abacha of hundreds of thousands of dollars and in a mining deal which cost the people of the Democratic Republic of Congo (DRC) some $1.3 billion (twice their annual health and education budget). The BVI alone is thought to host at least 400,000 shell companies dwarfing their tiny population of 33,000 people.
The UK should be preventing the illicit financial flows from these countries, not protecting those responsible. This isnt just the right and moral thing to do, its the smart, business thing to do.
The Department for International Development (DFID) currently gives DRC around 163 million a year and Nigeria 271 million a year – the third largest recipient in 2014/15. Nigeria has enjoyed a 50-year oil boom but at the same time has lost $400billion in oil revenues, whilst 84% of the population live on less than $2 a day.
This equates to around two thirds of the health budget or provision of education to 1.7million of the 5.5million girls out of school. It is in our interest to tighten UK legislation and support them in implementing a robust tax system, given their commodity wealth.
Back in London, Mr Cameron has repeatedly requested the OTs and CDs create public registers of who is really behind their myriad shell companies. At first they claimed they were holding public consultations on the matter but over a year since the first consultation was launched, it is clear that the islands leaders plan to stick to business-as-usual.
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Comment: A tax haven crackdown would help the developing world