In 'Tax Havens: Creating Turmoil' I have sought to illustrate the scale of the tax haven problem, to explain how they really work (an analysis that I can guarantee will be rejected by all those who work there, which will not in any way invalidate it) and then suggest how the turmoil that tax havens create can be tackled.

In the Tax Justice Network we have always assumed that a problem without a solution is in reality a statement of facts. Tax havens are not a fact of life: we have provided ample suggestions as to how the abuse they promote can be tackled::

1. The focus of regulation must shift onto limiting the impact of OFC operators within the global economy.

2. This can only happen by massively extending the transparency of the financial world, whether offshore or not. The UK must show its commitment to this task and call for broader based, more accessible and much better regulated and enforced registers of companies, trusts, charities and other entities created by statute law, and abolish the use of nominees within them.

3. In addition banking secrecy, whose only impacts are pernicious, must be outlawed. To this end the UK must seek that the EU extends the EU Savings Tax Directive to all privately owned entities (whether they be companies, trusts, foundations, partnerships with limited liability or their like).

4. Furthermore, the UK must seek that the EU extends the EU Savings Tax Directive to all forms of income derived from capital including all forms of interest, without exception, income from insurance policies and pension funds, dividends of all forms, trust distributions and the payment of royalties, licence income and similar payments derived from the ownership of intellectual property, and:

5. The UK must seek that the EU extends the EU Savings Tax Directive to additional territories to ensure that its effectiveness is not undermined by tax havens such as Hong Kong, Macau and Singapore.

6. Next the UK must seek to end the secrecy that has been exploited by multinational companies to hide the abuses that they have perpetrated in seeking, legally and illegally to deny states of the revenues due to them by the use of offshore structures. This requires that the secrecy that consolidated accounts permit on intra-group trading and the location of group transactions must be ended and the UK should actively require the adoption of country-by-country reporting by the International Accounting Standards Board and by individual countries.

7. Corruption is endemic within offshore financial centres. The UK must extend ratification of the UN Convention Against Corruption and the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions to all territories for which it is internationally responsible and require their active participation in its implementation.

8. As a pragmatic step the UK should recognise the role of OFCs in supplying the mechanisms used in many corrupt transactions, and actively promote research into methods of curtailing this supply that do not rely solely upon the actions of tax haven governments who have neither the power, resources or inclination to regulate that supply.

9. The role of the UK as a tax haven has to end if it is to have the necessary authority to tackle the issues identified in this report. This means that one of its most notable tax haven characteristics, the domicile rule, must be abolished.

10. As this report notes, because of its tax haven status the UK currently provides a taxation environment that favours large companies over small ones, quoted companies over unquoted companies and international entities over those operating solely in the UK. This is despite the fact that at least half of all the UK workforce work for companies whose activities are located solely in the UK. The UK should now commit to a tax strategy that ensures that all companies have equal access to markets, all can enjoy equivalent tax rates (there is serious risk that smaller companies are paying taxes at higher rates than large ones) and that undue regulatory burden is not placed on companies operating solely in the domestic market as a result of the action of those working on a multinational basis.

11. To reduce the impact of offshore tax competition the UK should work with the EU to promote adoption of a Common Consolidated Corporate Tax Base that limits the possibility for companies to arbitrage the taxation laws of one country against those used in another, and that allocates profit to country on the basis of a unitary apportionment formula taking into consideration solely where a company's employees, assets and sales are located, so limiting the possibility of profit being shifted to a tax haven.

12. This would represent a new development in the relationship between the UK and Europe on tax matters. The UK is believed to have been an obstacle to implementation of some aspects of the EU Code of Conduct on Business Taxation. The UK should commit to this Code, seek to extend it to personal taxation and require that the Conduct Group monitoring its implementation publish reports on its work.

13. The UK has a special responsibility for the considerable number of tax havens that exist under its international protection. In 1998 the UK published the Edwards Review of the Crown Dependencies, but failed to subsequently require the proper implementation of the recommendations of the resulting report. The world has changed substantially since 1998 and another review is required, with Royal Commission status, to determine the UK's future policy for all the tax havens for which it has responsibility.

14. It is classic tax haven practice to allow 'offshore activity' to be regulated more lightly that that supposedly 'onshore'. The UK should require that its tax havens operate systems of accountability and transparency with regard to corporate and other disclosure equivalent to those of the UK, and as recommended in this report.

15. The need for improvement in regulation in the UK's tax havens has been graphically described by the National Audit Office is a report published in November 2007. It is vital that the weaknesses identified by the NAO are tackled, meaning that the UK must:

- Improve the quality of its training for all staff seconded to Overseas Territories and the Crown Dependencies;
- Second such staff as are needed to ensure that the financial services regulation of all territories for which the UK is responsible is operational and effective;
- Ensure that deficiencies in current legislation for regulatory regimes are remedied with immediate effect, if necessary by way of Orders made in Council;
- Require that contingency plans be put in place for the demise of the financial services industry in each of these locations;
- Create plans to diversify the economies of these territories so that they might have alternative sources of income available to them;
- Make clear that funds to ensure that this development is possible are dependent upon adopting recommendations on transparency included in this report.

16. The Crown Dependencies are particularly associated with the UK and are especially vulnerable to political capture by the financial services industry. The Isle of Man can only operate because of subsidies amounting to more than £200 million a year provided to it by the UK; Jersey and Guernsey are likely to run substantial government deficits as a result of tax changes adopted to comply with the EU Code of Conduct on Business Taxation. Neither gives indication of having contingency plans available to manage those budgets given the current likely down turn in their trade as the world financial crisis develops. The UK government should:

- Make explicit the terms of its support for the Isle of Man government and make explicit its requirement that the Isle of Man comply with both the spirit as well as the letter of the EU Code of Conduct on Business Taxation in exchange for that support;
- Require that each of the Crown Dependencies prepare contingency plans based on the premise that there will be no growth in their financial services sectors for the next five years;
- Make explicit that support will only be forthcoming for these territories in future if they are willing to comply with recommendations on transparency included in this report;
- Require that each Crown Dependency develop a plan to break its dependency upon financial services as the main source of its income and demonstrate the viability of doing so.

17. No one suffers more from the existence of tax havens and OFC abuse than the developing countries of the world. For them this is not a question of ensuring the effectiveness of financial regulation or the efficiency of the tax system (although both have significance in developing countries): it is also a matter of life and death. The UK needs a policy on tax havens that is coherent with, and integrated into, its work on development. This must include commitments to:

- Provide technical support and training to developing countries to ensure they can engage effectively with tax haven abuses, whether relating to corruption, crime or taxation abuse;
- Provide technical support to developing countries to ensure that they can negotiate effective contracts with significant commercial trading partners that provide them with access to adequate information to ensure that appropriate taxes are paid within their domain as required by their law;
- Develop models for development that break the dependence on fiscal degradation that has been the pattern of incentive used to date, so undermining the credibility of developing country tax systems and their prospect of becoming effective, self governing democracies that are not dependent upon aid;
- Support developing countries in creating effective information exchange agreements with other nations and with tax havens to ensure they have access to the information they need to ensure they can collect the taxes due to them;
- Assist developing countries in recovering stolen assets that are their rightful property, including those that have arisen as a result of tax evasion, and to create effective mechanisms for the repatriation of these assets from locations over which the UK has control (including the City of London) to those places that need these assets to fulfil their development objectives.
- Ensuring that international and domestic civil society is represented in the processes recommended here to ensure that governments are held accountable for the actions they take in the name of the people they govern and that where appropriate training is provided to ensure that those groups are empowered to undertake these tasks.

18. The first recommendation of this report was that the focus of offshore regulation should now shift from the tax haven as such to OFCs. All the recommendations since then have had that goal in mind, and yet none, as such, tackles the OFC operators; all instead seek to curtail their access to the abusive products that they sell. We believe that in the absence of a world tax authority this is the most pragmatic approach to this issue. Two actions would assist this task, however:

The first would be to support the creation of a Code of Conduct for Taxation to be adhered to by governments. Progress is being made on this issue at the United Nations, and we recommend that that the UK support the development of that Code.

Second, there is an action that could be taken to tackle the OFC operators, and it is within the UK's power alone to enact it. The UK should promote a Code of Conduct for Taxation that would uphold the highest ethical standards of conduct, including a commitment to making full disclosure of all information noted in recommendation 2 above and to desisting from the promotion of all forms of tax avoidance on the part of all engaged in the taxation profession, whether in the UK or offshore. This should be enforced be refusing to extend UK government contracts for services to any company or firm that did not commit itself and all its group members and their affiliates trading under similar or associated names to that standard of conduct.

We are under no illusion about the size of the undertaking that implementation of these recommendations would require. We also believe them wholly justified. That's a theme to which I will return shortly.