The Great British role in facilitating global corruption - Lord Collins

Posted On: 
26th May 2016

Lord Collins of Highbury highlights the UK’s seminal role in a global system of tax avoidance and evasion, which sees $1trn ‘secreted out’ of the poorest countries each year.

Lord Collins wants the Government to tackle the estimated $1 trillion a year lost to poor countries through illicit capital flows, tax avoidance and crime
Credit: 
PA

The UK’s relationship with the developing world is one of “giving with one hand and taking with the other,” says Lord Collins of Highbury.

While our commitment to spend 0.7% of gross national income on development aid makes us one of the most generous countries in the world, the UK is simultaneously propping up a global system of tax havens and illicit capital flows that wipe out the international aid effort three times over.

The OECD estimates that systemic tax avoidance and evasion is costing the developing world $1trn each year -  three times the entire global aid budget - as money is ‘secreted’ away from the world’s poorest and into the richest and most secretive places on the planet.

As a result, and despite billions in taxpayer-funded aid, Africa is actually a net creditor to the world.

“There’s a vicious circle of aid dependency and tax avoidance,” said the Labour Lord.

“It’s very important that the Government sends money to developing countries, because it’s in our interests, and it’s in their interests, that we help those countries develop and that they’re sustainable.

“But as these OECD figures show, if companies operating in these countries just paid their tax, they wouldn’t need this aid.

“People think these countries are helpless, but actually they have huge potential. If we were to be fairer with them they’d be able to stand on their own feet and become very effective economies.”

The UK’s role in the global tax system is inimical. Together with its Overseas Territories and Crown Dependencies the UK is the largest secrecy jurisdiction in the world, and as the Panama Papers recently revealed, the British Virgin Islands is by far the most popular tax haven.

In one example, cited by Christian Aid, the Africa Progress Panel found that citizens of the Democratic Republic of the Congo were deprived of $1.35bn - twice their health and education budgets combined - due to the sale of mining contracts to five anonymous British Virgin Islands companies. Assets were sold at one sixth of their commercial value; secretive offshore companies gained profits of over 500%

For Lord Collins, as long as the owners of these companies remain anonymous, there’s nothing to stop them draining developing countries of resources and eroding their sustainability.

The UK has now led the way in introducing a ‘public register of beneficial ownership,’ where authorities can find out who owns these companies. All Britain’s overseas territories have now agreed to establish these registers, but most, if not all, are still refusing to make them public.

“They’ve all agreed to it, but it won’t be of any benefit if it remains hidden,” said Lord Collins. “The Panama Papers proved the essential requirement of transparency.

“Unless there’s an international investigation, people will still be able to hide. That’s a key issue in terms of corruption, because often the owners of these companies are family members of government officials.”

In the run up to the Anti-Corruption Summit earlier this month, Oxfam and Christian aid tried to persuade David Cameron to insist on public registers. But despite 81% of British adults agreeing that all companies, whether registered in the UK or its Overseas Territories, should be legally required to reveal their ultimate owners, these requests were not successful.

“The fact they weren’t is really disappointing,” he added, “as the agreements reached at the summit will be of no benefit for developing countries. They also do not demonstrate the leadership to the rest of the world that we should be giving, given our role in facilitating corruption right across the world.”

Lord Collins will be raising these issues in the House of Lords today, to put pressure on the Government to follow through with this crucial requirement.

“The Government says it wants public registers in our tax havens,” he concluded. “We now need to know what they are doing to get them. When will a timetable be set out? What pressure is being put on them? The Prime Minister should set a date by which the territories will be required to have public registers.”