Tax havens win reprieve over transparency

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Tax havens win reprieve over transparency

The Government have again been accused of defying Parliament, this time by delaying plans to require British Overseas Territories to bring in public registers disclosing the true identities of owners using companies to shelter assets.

Parliament set a date of 2020 for the introduction of public registers in British “tax havens” last year, when Labour MP Margaret Hodge and Conservative MP Andrew Mitchell sponsored an amendment to the Sanctions and Anti-Money Laundering Bill which had majority support in the House of Commons.

Since then, the British Overseas Territories have collectively launched a rebellion against the rules, threatening legal action or in some cases complete succession from the United Kingdom in order to prevent their implementation, which would undoubtedly harm their economies, as oligarchs, criminals and other dubious investors would seek to move their illicit fortunes to more opaque jurisdictions.

Foreign Office Ministers eventually caved in, telling the Overseas Territories that they did not need to implement the public beneficial ownership registers until 2023, three years after the date expected by Parliament, and a decade after David Cameron initially raised the issue as a flagship anti-corruption measure before the UK assumed chairmanship of the G7.

Hodge said: “This new timetable is a sleight of hand and an attempt to ignore the clear will of parliament.  It was clear not that that order in council should be introduced in 2020, but the public register.  We will have to consider what steps are taken to restore what was intended.”

Mitchell said: “It is good that the overseas territories and Foreign Office accept that important change is coming.  Nevertheless, parliament will be surprised at any move to put back the implementation date.  I am sure the overseas territories and the Foreign Office will not want to challenge parliament by revisiting an issue on which they were not successful.”

Chris Bryant, a Labour member of the Foreign Affairs Select Committee, said: “This timetable is not what parliament thought they were getting when they discussed this. The government has dragged its heels on this issue and this seems yet another unjustified delay. It as if the government has become the Department for Procrastination. It means the British Overseas Territories remain Britain’s Achilles heel when it comes to financial corruption, money laundering and dodgy money.”

Britain is uniquely placed to facilitate tax havens due to its Overseas Territories, remnants of the British Empire that fall under UK sovereignty but have significant autonomy in the areas of law and taxation.  Many are havens of the ultra-wealthy, enabling the local tax rate to be very low, in some cases zero.  These low taxation rates, combined with good banking infrastructure, high levels of privacy, and excellent links to the City of London, make British Overseas Territories prized locations for sheltering wealth from scrutiny or taxation.  The British Virgin Islands was home to about half of the companies referred to in the Panama Papers, revealed in 2015.

Bermuda and the Cayman Islands have said they will commit to a public register of beneficial owners but only when it becomes the global standard – alluding to the ease with which people could simply move their funds out of their territories to a jurisdiction that offers more privacy – such as Hong Kong or Costa Rica.  Gibraltar, which is leaving the EU along with the UK, has committed to having a publicly accessible register of beneficial ownership for legal entities in line with the EU 5th Anti-Money Laundering Directive by January 2020.

14th January 2019.