The UK has become a more attractive haven for businesses and super-rich individuals looking to hide their finances from the rule of law, according to the Tax Justice Network, which it said raised serious concerns about Britain’s post-Brexit strategy.
TJN’s financial secrecy index, which ranks countries on the size and secretiveness of their financial sectors every two years, showed the UK edged closer to the top 10 most secretive financial systems in the world. It ranked 12th out of 133 countries, having shot up from its previous slot at 23rd.
The TJN is now calling for sanctions against countries including the UK, US and the Cayman Islands British overseas territory for “backsliding” on transparency since 2018, just as other countries around the world became more open due to reforms such as automatic sharing of information about non-resident taxpayers.
The campaign group’s director and founder, John Christensen, said the UK’s poor showing raised serious concerns about how its policies around financial transparency would evolve after leaving the EU.
“The UK showed the world true leadership in 2016 by being the first country to adopt a public beneficial ownership register [for domestic companies] – now that progress has been thrown in reverse,” he said. “The UK’s surge up the financial secrecy index raises serious concerns about the UK’s post-Brexit strategy to turn the City of London into a ‘Singapore-on-Thames’,” he said, referring to fears that the City could end up serving as a low-tax, lightly regulated hub for individuals and business.
While the UK was likely to diverge from EU regulations on trade in financial services as a result of Brexit, the study claimed this could be good news for the rest of the EU. It meant the UK could not block anti-tax haven laws from being adopted in Brussels, and would not be in a position to defend the financial practices of its crown dependencies and overseas territories such as the Cayman Islands, as it has done in the past.
TJN said the UK performed poorly due to more rigorous methodology used for the 2020 report. A spokesperson explained that the UK’s ranking was also affected by historical changes to reporting rules that govern how multinational corporations are required to provide information on their operations in different countries.
However, a spokesman for HM Treasury denied that any substantial changes to its corporate reporting rules warranted changes to its ranking: “We do not therefore recognise the basis for the Tax Justice Network’s assessment. We have been, and will continue to be, at the forefront of the global drive for greater tax transparency.”
TJN’s 2020 financial secrecy index rankings (versus 2018 placing)
1. Cayman Islands (3)
2. US (2)
3. Switzerland (1)
4. Hong Kong (4)
5. Singapore (5)
6. Luxembourg (6)
7. Japan (13)
8. Netherlands (14)
9. British Virgin Islands (16)
10. United Arab Emirates (9)
11. Guernsey (10)
12. United Kingdom (23)
Source: The Guardian