‘Dirty money’: U-turn as Tories back plans to make tax havens transparent

May 8, 2018

Government says it will support amendment to introduce public ownership registers in Britains overseas territories

Britains overseas territories will be forced to adopt public registers of company ownership at the end of the decade after the government conceded it would have to support a backbench amendment designed to stem the global flow of dirty money.

Sir Alan Duncan, a Foreign Office minister, told the Commons that ministers recognised the majority view in this house and would not oppose an amendment to the sanctions and anti-money laundering bill from Labours Margaret Hodge and the Conservative MP Andrew Mitchell.

The retreat was forced on Theresa Mays government after the Speaker rejected a string of government compromise amendments, which would have watered down the disclosure commitment, because they were tabled so late. Afterwards, some of the overseas territories voiced their unhappiness at what had been agreed at Westminster.

The Hodge/Mitchell amendment requires the 14 overseas territories, including the financial centres of the British Virgin Islands and the Cayman Islands, to introduce public ownership registers by the end of 2020 or face having them imposed by the UK government.

Duncan told MPs that ministers were reluctant to dictate to the overseas territories, but acknowledged: We have listened to the strength of feeling in this house on this issue and accept that it is without a doubt the majority view of this house that the overseas territories should have public registers.

About half of the companies referred to in the Panama Papers, offshore ownership disclosures revealed by a consortium of investigative journalist organisations including the Guardian, were set up in the British Virgin Islands (BVI), according to Transparency International. The campaign group Global Witness estimates that 68bn flowed out of Russia via the British overseas territories between 2007 and 2016.

Quick guide

What are the Panama Papers?

The Panama Papers are a leak of 11.5m files from the database of the worlds fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source bythe German newspaper Sddeutsche Zeitung, which shared them witha network of international partners, including the Guardian, in April 2016.

The documents show the myriad ways in which the rich exploit secretive offshore tax regimes. Twelve national leaders were among 143 politicians, their families and close associates shown to have been using offshore tax havens. They included the Pakistani prime minister, Nawaz Sharif; the former vice-president of Iraq, Ayad Allawi; the president of Ukraine, Petro Poroshenko; and the prime minister of Iceland, Sigmundur Dav Gunnlaugsson.

An offshore investment fund run by the father of the then British prime minister David Cameronavoided paying tax in Britain by hiring residents of the Bahamas to sign its paperwork.

The leak is larger than theUS diplomatic cables released by WikiLeaks in 2010, and thesecret intelligence documents given to journalists by Edward Snowden in 2013.

Photograph: Joe Raedle/Getty Images South America

Hodge said the importance of the issue justified intervention in the affairs of the overseas territories, noting that the UK had done so before in forcing the repeal of the death penalty in 1991 and decriminalising homosexuality in 2000.

The areas on which we have intervened are moral issues. I cant think of another issue which is more moral than trying to intervene to prevent the traffic in corrupt money and illicit finance across the world, Hodge said.

Mitchell told MPs that the justification for disclosure was made elegantly but passively by the leaking of the Panama and Paradise Papers, which revealed the true owners of thousands of offshore companies. It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do it.

Quick guide

Key revelations from the Paradise Papers

1)Millions of pounds from the Queens private estate has been invested in a Cayman Islands fund and some of her money went to a retailer accused of exploiting poor families.

2)Prince Charless estate made a big profiton a stake in his friends offshore firm.

3)Extensive offshore dealings by Donald Trumps cabinet members, advisers and donors, including substantial payments froma firm co-owned by Vladimir Putins son-in-law to the shipping group of the US commerce secretary, Wilbur Ross.

4)Twitter and Facebook received hundreds of millions of dollars in investments that can be traced back to Russian state financial institutions.

5) The tax-avoiding Cayman Islands trustmanaged by the Canadian prime minister Justin Trudeaus chief moneyman.

6) TheFormula One champion Lewis Hamilton avoided taxes on a 17m jetusing an Isle of Man scheme.

7) A previously unknown$450m offshore trust that has sheltered the wealth of Lord Ashcroft.

8)Oxford and Cambridgeandtop US universitiesinvested offshore, with some of the money going into fossil fuel industries.

9) Theman managing Angolas sovereign wealth fund invested it in projects he stood to profit from.

10)Apple secretly moved parts of its empire to Jerseyafter a row over its tax affairs.

11) How the sportswear giantNike stays one step ahead of the taxman.

12)The billions in tax refunds by the Isle of Man and Malta to the owners of private jets and luxury yachts.

13)Offshore cash helped fund Steve Bannon’s attacks on Hillary Clinton.

14) Thesecret loan and alliance used by the London-listed multinational Glencorein its efforts to secure lucrative mining rights in the Democratic Republic of the Congo.

15) Thecomplex offshore webs used by two Russian billionairesto buy stakes in Arsenal and Everton football clubs.

16) Stars of theBBC hit sitcom Mrs Brown’s Boys used a web of offshore companies to avoid tax.

17) British celebritiesincluding Gary Linekerused an arrangement that let them avoid tax when selling homes in Barbados.

18)Prominent Brexit campaigners have put money offshore.

19) An ex-minister who defended tax avoidance has a Bahamas trust fund.

20) TheDukes of Westminster pumped millions into secretive offshore firms.

21) A tax haven lobby group boasted of ‘superb penetration’ at the top of the UK government before a G8 summit that was expected to bring in greater offshore transparency.

22) The law firm at the centre of the Paradise Papers leak was criticised for ‘persistent failures’ on terrorist financing and money laundering rules.

23) SevenRepublican super-donorskeep money in tax havens.

24) A topDemocratic donor built up a vast $8bn private wealth fundin Bermuda.

25) The schemes used to avoid tax on UK property deals.

26) Thecelebrities, from Harvey Weinstein to Shakira, with offshore interests.

27) How aprivate equity firm tried to extract 890m from a struggling care home operatorby making it take out a costly loan.

28) Trumps close allyRobert Kraft, the New England Patriots owner, is the longtime owner of an offshore firm.

29)One of the worlds biggest touts used an offshore firm to avoid tax on profits from reselling Adele and Ed Sheeran tickets.

Twenty Tory rebels had been lined up to support the amendment, including former ministers Ken Clarke and Nicky Morgan, which also had the support of Labour, the Scottish National party and the Liberal Democrats. That was enough to defeat the government had the matter been put to a vote.

A few MPs questioned how effective public disclosure would be. Geoffrey Cox, a Conservative backbencher, said the benefit from transparency would be a one-hit wonder and argued that money will go to where it is darkest to other global territories where there are no public disclosure requirements. Proponents, however, said that they believed it was important that the UK took some action to reduce the number of jurisdictions were company ownership and money could be hidden offshore.

Representatives of the territories had argued that the disclosure requirement would be expensive to implement at a time when countries in the Caribbean were recovering from the impact of Hurricane Irma.

Some overseas territories said they were unhappy with the outcome and tried to question the UKs ability to impose its will. Orlando Smith, the premier of the British Virgin Islands, said: It is not only a breach of trust but calls into question our very relationship with the UK and the constitutional rights of the people of the BVI.

But aid charities welcomed the result. Jon Date, senior advocacy manager at ActionAid UK, said: These measures will help flush out the corruption and tax evasion that keeps the most vulnerable people in the world including women and girls locked in poverty. By accepting this amendment, ministers will ensure that Britain will lead, not follow, when it comes to UK-linked tax havens.

The disclosure measure had originally been proposed by David Cameron and George Osborne in 2013, but the commitment was dropped when May became prime minister, prompting Hodge and Mitchell to act in concert to get the measure on the statute book.

The amendment does not apply to the crown dependencies, the Isle of Man and the Channel Islands, because parliament does not have the legal right to impose its will on them. However, Mitchell said that in the light of the success of the amendment parliament would expect the government to make the point persuasively, that we hope that the crown dependencies embrace the same ethical position and equal transparency.

Read more: https://www.theguardian.com/politics/2018/may/01/uk-to-introduce-public-ownership-registers-for-overseas-territories