In all the election noise, you are unlikely to have heard anything about a paragraph appearing on the 124th page of the Labour Manifesto – even though it is a manifesto pledge that could transform the world in a truly fundamental way.
The pledge commits the Labour Party to lift the veil of secrecy covering the UK’s Crown Dependencies and Overseas Territories – some of the largest tax havens and secrecy jurisdictions in the world. This will be done by “introducing strict standards for transparency for Crown Dependencies and Overseas Territories, including a public register of owners, directors, major shareholders and beneficial owners for all companies and trusts.”
Currently, the UK’s assorted Crown Dependencies and Overseas Territories act as some the largest tax and secrecy havens in the world. The British Virgin Islands, for example, has registered over a million companies since it introduced laws to shield ownership information in the early 1980s. As of 2015, 479,000 were still active. The Panama Papers revealed that over half of all the companies registered by Mossack Fonseca were registered in the BVI. What is the population of this tiny island archipelago? A touch over 28,000.
The secrecy afforded by these sorts of jurisdictions has and continues to facilitate crime around the world. It allows drug dealers, weapons smugglers, corrupt politicians and oligarchs to stash the proceeds of their illicit activity, recycle it back into the global economy, and avoid any accountability for their crimes. It is one of the most profound and enduring obstacles to tackling corruption around the word, serving only to provide cover to those who steal, pilfer, loot and plunder.
This is not some crazy conspiracy theory: the idea of public register is supported by a large number of prominent UK and global charities, including Christian Aid, Oxfam, Global Witness and the Tax Justice Network. They have been working incredibly hard to put this on the agenda. Considering the vested interests they are fighting against, they have been remarkably successful in doing so, including facilitating an attempted amendment to the Criminal Finances Bill that had cross-party support at the end of 2016. That amendment wasn’t passed, and there is real concern that the momentum on this issue may dissipate in the teeth of Brexit.
It is also the opinion of the UK’s Parliamentary Committee on International Development. In October 2016, it published a report on the UK’s efforts to fight corruption in the wake of the much-hyped Anti-Corruption Summit earlier that year. The Committee warned that “lack of transparency in the Overseas Territories and Crown Dependencies will significantly hinder efforts to curb global corruption and continue to damage the UK’s reputation as a leader on anti-corruption.
Of course, it is not just criminals who benefit from the existence of tax and secrecy havens. Multinational corporations and the world’s super-rich use these sorts of places to avoid paying tax on their profits in the countries where the profits are earned. In 2016, the OECD estimated that $240bn is lost in tax revenue around the world as a result of tax evasion, in large part facilitated and aided by secrecy jurisdictions. A large majority of that leakage is from developing countries. In 2012, the Tax Justice Network calculated that the world’s 80 tax havens held somewhere between $21 and $32trillion in private financial wealth, all of which was not properly taxed. And this is just financial wealth, which does not include “a big share of the real estate yachts, racehorses, gold bricks – and many other things that count as non-financial wealth.”
All of this could be swallowed, maybe, if there was some real purpose to these havens besides for aiding and abetting criminals and tax avoiders. No such luck. In 2016, ahead of the UK’s anti-corruption summit, 300 of the world’s leading economists wrote an open letter to “world leaders”, which was facilitated by Oxfam. Amongst the signatories were Thomas Piketty, the 2015 Nobel Prize winner for economics Angus Deaton, and Olivier Blanchard, the former chief economist of the International Monetary fund. They argued that “the existence of tax havens does not add to overall global wealth or well-being; they serve no useful economic purpose.”
Indeed, beyond protecting the illicit wealth of criminals and tax avoiders, the real impact of secrecy jurisdictions is to distort the market and provide an unfair advantage to those who break the law.
Sadly, the Tories appear to have rowed back on their fleeting dalliance with corporate ethics following the departure of David Cameron, who, to his credit, tried to place it on the global agenda. Indeed, the Tory manifesto is entirely silent on secrecy jurisdictions, and, in its anaemic two paragraphs on tax evasion, makes no mention of the role of the Overseas Territories and Crown Dependencies in facilitating it. This is unsurprising, perhaps, given Theresa May and Phillip Hammond’s comments that have been widely interpreted to suggest that they would turn the UK into a tax haven should Brexit negotiations falter.
Adding salt to the wound is the Tory pledge to scrap the Serious Fraud Office and move its work into the National Crime Agency (NCA). The NCA has yet to develop much of a reputation, and it has failed to bring charges in a single international anti-corruption case. By moving the SFO into the NCA, it could seriously limit its freedom from political interference, as well as disrupt a number of high-profile investigations the SFO is undertaking into corruption by UK companies.
There is no doubt that if Labour were to form the government following the upcoming General Election it would face enormous push-back from incredibly powerful vested interests, including the City of London. Within Parliament, it is conceivable that some MPs or their families have made use of secrecy jurisdictions for “tax efficiency” and would be massively embarrassed through exposure. Expect to hear much about the supposed sovereignty of the havens and the UK’s lack of power to effect change, a set of shibboleths rapidly deployed but easily dismissed.
As a result, there is no guarantee that Labour would succeed in its pledge in its entirety. But it would be truly phenomenal if, for the first time ever, this was the official starting point of British policy.
If the pledge was implemented, the reverberations around the world would be profound. Imagine Russian oligarchs unmasked; Saudi princes exposed; the illicit funding streams diverted by politicians and funding political parties revealed; and the world’s despots and dictators shown to be what they really are: a vile criminal establishment that has been enabled by secrecy jurisdictions and the governments, particularly the UK, that control them.
Labour’s manifesto pledge would make the world fundamentally more transparent and empower democracy around the globe. It could literally transform the world – and only for the better.