The Tax Justice Network warmly welcomes the Treasury Select Committee hearings on Offshore Financial Centres (OFCs) that start on 1 July 2008. In anticipation of those hearings TJN-UK has submitted evidence to the Committee and with its agreement is publishing that submission today.
Entitled 'Tax Havens: Creating Turmoil' the submission examines the harm that tax havens and OFCs cause to the global economy. As well as dealing with each of the Committee's 12 questions the submission provides more than 100 pages of background evidence on the nature of the offshore world, and the harm it causes.
In a press release issued today John Christensen, International Director of the Tax Justice Network said:
"We know that a large number of tax havens are submitting evidence to this Committee claiming that their actions are beneficial. We also know that major accounting, legal and banking businesses, who make extensive and very profitable use of tax havens, will back these claims. The evidence though is clear: tax havens function for the sole purpose of allowing people and companies to avoid and evade tax law and other regulations in the countries where they live or work. Tax havens are used to attack the sovereignty of nation states and they harm the efficiency of globalised markets."
Richard Murphy, a chartered accountant and director of Tax Research LLP, who wrote the report for the Tax Justice Network added:
"This report shows that tax havens and offshore financial centres are not the same thing. Tax havens are the countries that create the laws designed to undermine other states. Offshore financial centres are made up of the lawyers, accountants and bankers who sell the resulting products to people from other countries who want to abuse the law of the place in which they live."
"Tax havens and OFCs need each other to undertake their immensely damaging and sometimes illegal trade. It is vital though that we see them as different things. To date all effort is being put into regulating tax havens, and they are then expected to regulate the OFCs that they host. However, as this report shows, all the power in this relationship rests with the OFCs because they are managed by migrant professionals whose only interest is in pursuing money without consideration for society. As we have seen in the UK this year, if they do not get their way they threaten to leave. In a small economy this could destroy a country."
As John Christensen explained:
"Recent attempts by international organisations to regulate tax havens have failed because they were far too timid and have targeted entirely the wrong players. To stop tax havens from causing further harm we must put the accountants, lawyers and bankers who operate there out of business. This will require tackling the secretive arrangements they use to hide their own and their client's activities. This is entirely practicable and our report includes 18 recommendations on how to proceed."
Richard Murphy said:
"I am ashamed that my own profession, far from tackling tax haven abuse, has become a core part of the problem. The Treasury Select Committee should not be asking the Big Four firms who come before it 'how can we solve this problem?' but should instead be asking 'Why is it that you are abusing in the UK through your tax haven operations because you are present in every one of the tax havens that seeks to undermine the law and taxation systems of this country?"