The UK and its “corporate tax haven network” is by far the world’s greatest enabler of corporate tax avoidance, research has claimed.
British territories and dependencies made up four of the 10 places that have done the most to “proliferate corporate tax avoidance” on the corporate tax haven index.
The UK ranked 13th on the list, which was published by the Tax Justice Network on Tuesday.
The shadow chancellor, John McDonnell, said the findings showed the government’s record on tax avoidance was “embarrassing and shameful”.
McDonnell added: “The only way the UK stands out internationally on tax is in leading a race to the bottom in creating tax loopholes and dismantling the tax systems of countries in the global south.
“The rot has to stop. While Tory leadership hopefuls promise tax giveaways for the rich, a Labour government will implement the most comprehensive plan ever seen in the UK to tackle tax avoidance and evasion.”
A government spokesman said tackling tax avoidance was a priority and the UK had “been at the forefront of international action to reform global tax rules”.
The index scores each country’s system based on the degree to which it enables corporate tax avoidance, combined with the scale of its corporate activity, to determine the share of global corporate activity put at risk of tax avoidance by the country.
At the top of the list was the British Virgin Islands, followed by Bermuda and the Cayman Islands – all British overseas territories.
Jersey, a crown dependency, was seventh on the list behind the Netherlands, Switzerland and Luxembourg, with Singapore, the Bahamas and Hong Kong completing the top 10.
The network said that through its network of satellite jurisdictions, the UK bore the lion’s share of responsibility for the “breakdown of the global corporate tax system”.
It added: “The UK, with its corporate tax haven network, is by far the world’s greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system, accounting for over a third of the world’s corporate tax avoidance risks.
“That’s four times more than the next greatest contributor of corporate tax avoidance risks, the Netherlands, which accounts for less than 7%.”
The index covers 64 jurisdictions and is based on a corporate tax haven score reflecting how aggressively they use tax cuts, loopholes, secrecy and other mechanisms to attract multinational activity; and a global scale weight, reflecting how big a player is in cross-border activity, the network said.
Eight out of the 10 jurisdictions whose systems received the highest corporate tax haven scores for enabling avoidance were part of the UK network of territories and dependencies, the Tax Justice Network said.
These were the British Virgin Islands, Bermuda, the Cayman Islands, Turks and Caicos Islands, Anguilla, the Isle of Man, Jersey and Guernsey.
The Tax Justice Network said the scale at which jurisdictions have enabled corporate tax avoidance risks to entice multinationals has made countries’ corporate tax rates “meaningless”.
It warned this had also triggered a “race to the bottom” that would further deplete tax revenues.
Alex Cobham, the Tax Justice Network chief executive, said a handful of the richest countries had waged a world tax war “so corrosive it had broken the global corporate tax system beyond repair”.
The network called on governments to introduce a single tax approach that would fully align multinationals’ taxable profits with the location of their economic activity.
