Britain is the world’s biggest sponsor of tax avoidance, campaigners have said, blaming light-touch regimes in our overseas territories.
The Tax Justice Network pressure group ranked 64 countries based on how much tax avoidance they enabled, taking into account the size of their economies.
Topping the list was the British Virgin Islands, followed by Bermuda and the Cayman Islands – all British overseas territories.
Jersey, a Crown dependency, was seventh. The UK itself was ranked 13th.
The Tax Justice Network pressure group ranked 64 countries based on how much tax avoidance they enabled
Following the study the group found that the British Virgin Islands, followed by Bermuda and the Cayman Islands topped the list
The index scores each country’s system based on the degree to which it enables corporate tax avoidance combined with the scale of its corporate activity to determine the share of global corporate activity put at risk of tax avoidance by the country.
The network said that through its network of satellite jurisdictions, the UK bears the lion’s share of responsibility for the ‘breakdown of the global corporate tax system’.
It added: ‘The UK with its corporate tax haven network is by far the world’s greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system, accounting for over a third of the world’s corporate tax avoidance risks.
‘That’s four times more than the next greatest contributor of corporate tax avoidance risks, the Netherlands, which accounts for less than seven per cent.’
Free market campaigners stressed that low-tax nations provide a ‘great boost to tax competition’.
Matt Kilcoyne, from the Adam Smith Institute, said the territories kept pressure on other countries to ‘lower their rates and reduce complexity’.
The index covers 64 jurisdictions and is based on a corporate tax haven score reflecting how aggressively they use tax cuts, loopholes, secrecy and other mechanisms to attract multinational activity; and a global scale weight, reflecting how big a player it is in cross-border activity, the network said.
The Tax Justice Network said the UK bears the lion’s share of responsibility for the ‘breakdown of the global corporate tax system’
Eight out of the 10 jurisdictions whose systems received the highest corporate tax haven scores for enabling avoidance were part of the UK network of territories and dependencies, the Tax Justice Network said.
These were the British Virgin Islands, Bermuda, the Cayman Islands, Turks and Caicos Islands, Anguilla, the Isle of Man, Jersey, and Guernsey.
The Tax Justice Network said the scale at which jurisdictions have enabled corporate tax avoidance risks to entice multinationals has made countries’ corporate tax rates ‘meaningless’.
It warned that this had also triggered a ‘race to the bottom’ which will further deplete tax revenues.
Chief executive Alex Cobham said a handful of the richest countries have waged a world tax war ‘so corrosive it had broken the global corporate tax system beyond repair’.
He added: ‘The hypocrisy revealed by the Corporate Tax Haven Index is sickening.
‘The ability of governments across the world to tax multinational corporations in order to pay teachers’ wages, build hospitals and ensure a level playing field for local businesses has been deliberately and ruthlessly undermined.
‘To curtail the corporate tax avoidance that costs hundreds of billions of dollars every year, governments must finally deliver international rules that ensure profits are declared, and tax paid, in the places where real economic activity takes place.
‘Corporations should be taxed where their employees work, not where their ledgers hide.’
The network is calling on governments to introduce a single tax approach that will fully align multinationals firms’ taxable profits with the location of their economic activity.
A Government spokesman said: ‘Tackling tax avoidance, evasion and unfair outcomes is a priority for this government.
‘We’ve been at the forefront of international action to reform global tax rules, using our presidency of the G8 in 2013 to initiate the first substantial renovation of international tax standards in almost a century.
‘We also introduced the Diverted Profits Tax to counter aggressive tax planning techniques used by multinationals, and we’ve secured and protected £200 billion in tax revenues since 2010 from compliance activities which would otherwise have gone unpaid.’