UK by far the biggest enabler of global corporate tax dodging, groundbreaking research finds

The UK  is by far the world’s biggest enabler of corporate tax dodging, helping funnel hundreds of billions of dollars away from state coffers, according to an international investigation.

Of the top 10 countries allowing multinationals to avoid paying billions in tax on their profits, four are British overseas territories.

Chancellor Philip Hammond has pledged to crack down on multinationals like Google and Amazon that boost profits by shifting huge sums through low-tax jurisdictions.

But an index published today by the Tax Justice Network found that the UK has “single-handedly” done the most to break down the global corporate tax system which loses an estimated $500bn (£395bn) to avoidance.

The amount dodged globally each year is more than three times the NHS budget or roughly equivalent to the entire Gross Domestic Product (GDP) of Belgium.Tax haven territories linked to Britain are responsible for around a third of the world’s corporate tax avoidance risk – more than four times the next greatest contributor, the Netherlands.

Topping the list was the British Virgin Islands, followed by Bermuda and the Cayman Islands – all British overseas territories. Jersey, a Crown dependency, was seventh while the UK itself comes in thirteenth.

Alex Cobham, chief executive at the Tax Justice Network, described the hypocrisy of rich nations which enable tax avoidance as “sickening”.

“A handful of the richest countries have waged a world tax war so corrosive, they’ve broken down the global corporate tax system beyond repair,” Mr Cobham said.

“The UK, Netherlands, Switzerland and Luxembourg – the Axis of Avoidance – line their own pockets at the expense of a crucial funding stream for sustainable human progress. 

“The ability of governments across the world to tax multinational corporations in order to pay teachers’ wages, build hospitals and ensure a level playing field for local businesses has been deliberately and ruthlessly undermined.”

The index scores each country’s system based on the degree to which it allows companies to avoid tax combined with the scale of its corporate activity to determine the share of global taxes put at risk.

It covers 64 jurisdictions and is based on a score reflecting how aggressively they use tax cuts, loopholes, secrecy and other mechanisms to attract multinational activity.

Other countries in the UK network, including Turks and Caicos Islands, Anguilla, the Isle of Man, and Guernsey, also scored highly for allowing corporate tax dodging. 

Such countries have prompted a “race to the bottom” that has depleted tax revenues and has particularly harmed poorer nations, the Tax Justice Network said.

While many of the top 10 tax haven territories are tiny, they are home to trillions of dollars of foreign direct investment – suggesting that many of these flows may be motivated by reducing tax bills rather than genuine economic activity.

Labour’s shadow chancellor, John McDonnell, said, “The Tories’ record on tax avoidance is embarrassing and shameful.

“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.”

Mr Cobham added: “To curtail the corporate tax avoidance that costs hundreds of billions of dollars every year, governments must finally deliver international rules that ensure profits are declared, and tax paid, in the places where real economic activity takes place.

“Corporations should be taxed where their employees work, not where their ledgers hide.”