Much of the response to the Paradise Papers has, so far, revolved around tax avoidance.
While the opposition has said that it is awful, costs the UK economy billions, and that there must be a full public inquiry, the British government seems to have merely shrugged its shoulders and said it is all perfectly legal.
Despite working ourselves into a lather about the latest celebrities to be outed as tax dodgers, one crucial issue has been noticeably absent from the past week’s coverage. “Offshore Financial Centres” – the places named in the Paradise Papers, including the UK’s Overseas Territories and Crown Dependencies – have previously been accused of facilitating all kinds of murky business around the world.
Global corruption is a major problem. The International Monetary Fund has said that bribery alone costs as much as two per cent of global GDP. The impact is even more stark in developing countries. According to Washington-based watchdog Global Financial Integrity, illicit financial flows, which include the proceeds of corruption, are costing developing countries over $1 trillion every year.
As we continue trawling through the Paradise Papers, let’s not forget that the secrecy provided by UK territories may be facilitating corruption right around the world.
According to the NGO, Global Witness, $38m of public money from Equatorial Guinea was spent on a private jet via an anonymous company, payments of over £143m through an anonymous company formed part of an estimated $6bn arms-dealing corruption scandal, and $132m was paid to an anonymous company to be used, in part, for in exchange for a lucrative contract to build a liquified natural gas plant in Africa. All involved UK-governed territories and anonymous companies.
Meanwhile, a World Bank report in 2011 found that 70 per cent of the grand corruption cases reviewed relied on secret company ownership. Company service providers registered in the UK and in its Overseas Territories and Crown Dependencies were second on the list in providing these companies.
Public trust in governments is pretty low across the globe at the moment, so it is hardly surprising that we see overwhelming support for making the true ownership of companies public. No matter where they are registered.
Corruption stops markets from functioning effectively. As revelations continue to pour forth from the Paradise Papers, surely it’s now time for the British government to insist on the same levels of transparency in the UK’s Overseas Territories and Crown Dependencies as exists in the rest of the UK. Public registers of beneficial ownership would be a good start. Global civil society has been calling for these for years, and even the Head of the Serious Fraud Office, David Green, has said they would be good.
Anti-corruption efforts have been high on the political agenda in recent years. David Cameron introduced the UK’s public register of the true owners of companies, and countries around the world have since followed suit. He hosted a specific Anti-Corruption Summit just last year. But despite talking the talk about transparency in the Overseas Territories, the previous government didn’t finish the job.
It’s now up to this government, in the light of these astonishing leaks in the Paradise Papers, to put an end to the risk of having corruption facilitated by UK-governed territories. Philip Hammond should focus on it in his Budget tomorrow for the good of our economy, as well as our ethics.