The Institute for Economic Affairs (IEA) has today attacked the UK government’s crackdown on tax havens, saying it undermines competition and breaches people’s right to privacy.
Laws to make it public knowledge who avoids tax by registering companies in overseas British territories contradict principles of liberal democracy and damage the economy, the free-market think tank’s new report says.
The report criticises the government’s 2018 decision to force British territories that have low corporate taxes, such as the British Virgin Islands, to create public registers of who owns companies on them.
It said that someone named on an overseas register will be labelled a “tax cheat” and “face the commercial and social risks attendant on that status”, exposing them “to the rule of the mob.”
Labour MP Margaret Hodge, a leading member of the campaign for tax transparency in Britain’s tax havens, told City A.M: “Public registers of beneficial ownership tackle secrecy not privacy. They do not affect personal bank accounts or trusts.”
She said: “Only if somebody owns more than 25 per cent of a company would they be registered as a beneficial owner. Greater transparency in Britain’s tax havens is the vital next step in stopping money laundering, tax evasion, and tax avoidance.”
The IEA’s report said laws to tackle tax avoidance stifled positive competition. “By pushing corporate tax rates down, tax havens do other countries a service”, it said, as “corporate tax is an inefficient tax”.
Governments implement such policies because “they fear a loss of tax revenues they would otherwise receive and the competition puts pressure on them to cut their own corporate tax rates”, it said.
In 2018, the UK’s corporate tax rate of 19 per cent was one of the lowest among developed countries, two percentage points lower than the US's. Germany’s was 29.9 per cent while France’s was 44.4 per cent.