By Anas Sarwar MP
As part of the Small Business, Enterprise and Employment Bill which Parliament is expected to approve today, the government is attempting to implement a public register showing who really owns companies. The bill is a good example of how UK legislation can affect countries around the world, especially those in the process of development.
The developing world loses around three times as much through tax avoidance and evasion as it gains through aid. Ending secrecy around who really owns companies is a vital part of fixing this, because many companies dodge taxes by hiding their identities using complex and secretive ownership structures.
The new register of who owns companies is an important reform which will make it harder for criminals to use companies as what Global Witness calls 'get-away cars' – vehicles for corruption, money laundering, tax evasion, terrorist financing and so on – safe in the knowledge that there are no links to them personally.
Unfortunately, Mr Cameron has had far less success with the UK’s Overseas Territories (OTs) and Crown Dependencies(CDs). Between $21 – $32 trillion in private financial assets is held in tax havens and of this, an estimated 25-30% is from developing countries.
The British Virgin Islands (BVI) in particular is known for creating firms whose real owners are untraceable – so no surprise that BVI firms have turned up in the HSBC Swiss tax scandal, in the theft by Nigerian dictator Sani Abacha of hundreds of thousands of dollars and in a mining deal which cost the people of the Democratic Republic of Congo (DRC) some $1.3 billion (twice their annual health and education budget). The BVI alone is thought to host at least 400,000 shell companies dwarfing their tiny population of 33,000 people.
The UK should be preventing the illicit financial flows from these countries, not protecting those responsible. This isn’t just the right and moral thing to do, it‘s the smart, business thing to do.
The Department for International Development (DFID) currently gives DRC around £163 million a year and Nigeria £271 million a year – the third largest recipient in 2014/15. Nigeria has enjoyed a 50-year oil boom but at the same time has lost $400billion in oil revenues, whilst 84% of the population live on less than $2 a day.
This equates to around two thirds of the health budget or provision of education to 1.7million of the 5.5million girls out of school. It is in our interest to tighten UK legislation and support them in implementing a robust tax system, given their commodity wealth.
Back in London, Mr Cameron has repeatedly requested the OTs and CDs create public registers of who is really behind their myriad shell companies. At first they claimed they were holding public consultations on the matter but over a year since the first ‘consultation’ was launched, it is clear that the islands’ leaders plan to stick to business-as-usual.
Christian Aid has closely tracked the consultations and contributed to all of them, as have I in joint submissions with parliamentary colleagues and non-government organisations (NGOs). Over two years later and only one, The Cayman Islands, has revealed its official conclusions in the wake of the consultation, and not one has implemented the public register.
All this leaves me increasingly concerned that the UK Government and the islands' leaders were only ever involved in window dressing. Given this intolerable situation and the looming UK election, it is no wonder that Mr Cameron has gone quiet about these most anti-social members of the UK family.
Labour’s view is that the UK can no longer turn a blind eye to their wrongs. Furthermore, we can’t expect other countries to listen to the UK about tax dodging and corruption when we can’t even clean up our own backyard. A Labour government will insist on the OTs and CDs introducing central, publicly accessible registers of the millions of people who are the real, flesh-and-blood owners of the companies they host.
We will also ask others to act. The Organisation of Economic Cooperation and Development maintains an international blacklist of jurisdictions which fail to cooperate in tackling financial crime. If necessary, we will call on other governments to limit their business with the OTs and CDs.
Mr Cameron has asked the islands nicely and he has been ignored. A Labour Government will not have his patience.
Anas Sarwar is the shadow minister for International Development
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