John McDonnell MP
Labour’s Tax Transparency Enforcement Programme
Tax havens play no positive role. It should be a matter of shame to the British Government that, despite all their rhetoric, more than half the companies recently named in the Panama Papers were registered in UK governed tax havens. The involvement of senior figures in foreign governments has given the impression of a nexus of influence and opacity involving major political and corporate players avoiding taxes in countries across the globe. High net worth individuals are not the only users of tax havens. Earlier this year it emerged that profitable large technology companies have paid a tiny fraction of their turnover in corporation tax, moving a large proportion of their global profits into UK overseas territories. While closer to home, a recent period of disclosure for tax repatriation from Crown dependencies brought significantly less than promised, with HMRC blaming their staff’s inability to process on top of existing workloads. Recent revelations in the ‘Panama Papers’ have shown that the Government’s approach to closing tax havens in British overseas territories and crown dependencies has not delivered the returns the Government promised. We need a new and more effective approach
Labour is proposing:
1. An immediate public Inquiry
The Labour Party wants to see an immediate public enquiry launched into the revelations in the Panama Papers, to establish the harm done to the UK’s tax revenue and consider detailed proposals for reform including, if necessary, greater amendments to UK company and/or trust law to increase transparency.
2. Greater Parliamentary Scrutiny
Change the register of members’ interests to include mandatory publication of all offshore holdings.
3. Specialised Tax Enforcement unit
Labour wants HMRC to be properly resourced to investigate any potential illegality whether in relation to tax law or conflicts of interest for legislators. We would double the number of staff scrutinising the tax affairs of High Net Worth individuals and companies.
4. Public Sector Transparency
Foreign companies wanting to tender for public sector contracts must have their beneficial owners listed publicly. Examine proposals for companies bidding for public sector contracts and procurement to register for tax purposes in the UK, including full disclosure of beneficial ownership listed publicly and accounts filed with Companies House.
5. Cooperation with European partners: Country by Country Reporting & protection for whistleblowers
Full public publication of country-by-country reporting for multinationals negotiated at EU level with agreed fairer thresholds for reporting for companies and obligations to report publicly about activities in every country in which they operate, be it inside or outside the EU.
Support proposals for genuine and robust protection and safeguards for whistleblowers in this area at a European level.
6. Firm Anti-Avoidance Rule
Introduction of a General Anti-Avoidance Principle, strengthening and extending the General Anti-Avoidance Rule to cover offshore abuses.
7. Crack down on accounting tricks
Look into the development of the ‘Ramsay principle’ by courts. Courts should ignore “artificial steps” inserted in transactions to try and reduce the tax on the transaction.
8. Enforce our programme working with the banking sector
Work with banks to provide further information over beneficial ownership for all companies and trusts that they work for.
9. Strict minimum standards for crown dependencies and overseas territories: All territories which enjoy the protection of the UK for their financial stability, foreign policy and/or security policy must adhere to a minimum standard of transparency in relation to company and trust ownership.
This minimum standard will include a public register of owners, directors, major shareholders and beneficial owners for all companies and trusts.
10. A Labour led review into the registry of Trusts
Labour will launch a review toproduce detailed proposals for aregistryof (a) trusts which transfer the residence of their trustees offshore and (b) tax avoidance schemes involving trusts which are disclosed to the HMRC under the current law. In the case of trusts with no beneficial owner listed, the settlor would be deemed the beneficial owner.
The legal precedents for enforcing major legislative standards on overseas territories are many: in recent years the UK government has intervened in the Caribbean overseas territories over corruption, the death penalty and legalising homosexuality. Eric Pickles said in October 2015 that the Government could legislate to force UK-governed tax havens to reveal true owners of companies.
Labour believes that a precedent has been set. There are minimum ethical standards which territories must adhere to if they wish to enjoy the status and protections associated with British overseas territory status. In return for improving transparency, under Labour the UK would give overseas territories financial support to aid the transition to build economies which are not reliant on offshore financial services. Labour will seek to add any countries which are acting as tax havens to the OECD blacklist. In the case of the Crown dependencies, under Labour the UK will no longer support their existing EU concessions (eg. no trade barriers) if minimum standards are not met.