Labour leader gives tax havens 6 months to ‘open up’ or face the consequences
10 Mar 2015 12:00 am by Rebecca Gillingham
Tax, or more accurately tax avoidance, is a political hot potato. The media-fuelled public and political outcry in recent times has seen HSBC executives appear before parliamentary committees in the UK, coffee chains boycotted and celebrities under scrutiny.
Now Labour leader, Ed Miliband, has pledged to make tax havens 'open up' should his party win the election. According to Miliband, tax havens in British Overseas Territories and Crown Dependencies cost the UK exchequer billions of pounds every year in lost revenue.
In an article published in The Guardian, the Labour leader accused David Cameron of failing to honour his promise to "shine a light on the tax havens". He claimed the lack of leadership shown by the UK government to date has slowed the pace of reform on tax avoidance across the world.
You can read Miliband's in full on LabourPress. Under the new proposals, British-linked tax havens will have 6 months to publish publicly accessible central registers of beneficial ownership. If they fail to do so, their protections will be withdrawn, and their names added to the OECD's black list.
Defending his record in a recent interview, David Cameron is quoted as saying that "no government has done more than this one to crackdown on tax evasion and aggressive tax avoidance". He pointed to the subject being high on the agenda at the recent G8 meeting, and reiterated his comment to deliver more transparency to ensure big companies pay their taxes "properly".
Of course, the issue of beneficial ownership is much wider than simply identifying liabilities to drive up the tax take. The battles against money laundering and terrorist funding are tied to an accurate understanding of who owns what, and where.
Here, there has been significant action. The World Bank Group and the United Nations Office on Drugs and Crime (UNODC) have established the Stolen Asset Recovery Initiative (StAR) to end safe havens for corrupt funds. Similarly, regular extensions of the Financial Action Task Force's (FATF) Politically Exposed Persons (PEP) list are important steps in the fight against financial crime.
The question in terms of beneficial ownership is whether the rhetoric from the politicians will convert to action around the world. Certainly, identifying individuals with a controlling interest in companies has long been a requirement under global AML standards. Yet few countries actually mandate the collection and disclosure of this data.
The incoming EU Fourth Money Laundering Directive (MLD4), to improve existing anti-money laundering and counter-terrorist financing (CTF) legislation, aims to do just that.
Under the revised rules, businesses will be required to provide detailed information regarding the beneficial ownership of their company or companies. This information will be stored on central registries in Member States, and made available to regulators and enforcement agencies. Banks and other companies subject to AML rules will be classed as "obliged entities" under the new legislation and will have access to the information for due diligence purposes. The new rules are expected to come into force in the next 12-18 months.
Ultimately, with beneficial ownership and transparency now firmly on the political agenda, we expect more press jousting and robust language as Election Day gets closer in the UK. But whether the rhetoric becomes reality, and what these commitments will ultimately mean for the business community, remains to be seen.
- London property boom fuelled by dirty money
- Show me the money
- Lifting the corporate veil: EU aims new AML directive at hidden beneficial ownership
ps 3 ways you can apply this information right now to better understand your supply chain
- Due diligence on clients and third parties can help to mitigate your risks. If you are looking to know who you are really doing business with and protect your reputation, click here to find out how our solutions can help.
- Share this article on LinkedIn. Share our content with your existing contacts and groups to create debate.
- Leave a comment below. Let's start a conversation!