Monday, October 10, 2011

Addicted to tax havens: The secret life of the FTSE 100

ActionAid have produced another fine report, this time about the use of tax havens by multinational corporations listed on the FTSE 100. The statistics are staggering: for example more than half of the financial sector's overseas subsidiaries are in tax havens. More precisely:
  • The FTSE 100 largest groups registered on the London Stock Exchange comprise 34,216 subsidiary companies, joint ventures and associates.
  • 38% (8,492) of their overseas companies are located in tax havens.
  • 98 groups declared tax haven companies, with only two groups, Fresnillo and Hargreaves Landsdown, who did not.
  • The banking sector makes heaviest use of tax havens, with a total of 1,649 tax haven companies between the ‘big four’ banks. They are by far the biggest users of the Cayman Islands, where Barclays alone has 174 companies.
  • The biggest tax haven user overall is the advertising company WPP, which has 611 tax haven companies.
  • The FTSE 100 companies make much more use of tax havens than their American equivalents.
  • There are over 600 FTSE 100 subsidiary companies in Jersey (more than in the whole of China), 400 in the Cayman Islands and 300 in Luxembourg – all tiny tax havens.
Alongside the financial sector, oil and mining companies are also huge users: TJN recently noted that they are often headquartered in Canada, and ActionAid noted that
"BP and Shell have almost 1,000 tax haven companies between them, including more than 100 in the Caribbean (hardly a major source of oil)."
(Recently we noted the huge role that the Netherlands plays in hosting offshore subsidiaries of oil companies, and another report by Publish What You Pay Norway noted the huge role played by Delaware too.)

ActionAid points to the artificiality of it all:
"In locations such as Mauritius, Jersey and Delaware we have identified hundreds of subsidiaries owned by dozens of different multinationals that are registered at a handful of individual addresses, belonging to offshore law firms."
And to the crucial development angle:
Corporate tax avoidance, one of the main reasons companies use tax havens, has a massive impact on developing and developed countries alike. The lack of transparency makes it difficult for developing country tax authorities to identify and collect taxes owed by global companies operating in their countries.
All credit to ActionAid for this:
This research is based on information that had never been disclosed, let alone analysed, until this year.11 UK law compels companies to report all of their subsidiary companies, together with their country of registration. When we looked for this information in early 2011, we discovered that more than half of the FTSE 100 were not complying with this legal obligation. When enquiries to individual companies failed to persuade them to disclose the information, we submitted complaints to Companies House, forcing the disclosures as part of companies’ annual returns and sparking Business minister Vince Cable to announce an investigation.
The Guardian, reporting this, (and providing a listing of the FTSE 100 and their subsidiaries) notes that:
"There is no standard definition of what constitutes a tax haven."
Indeed. We use the terms 'tax haven' and 'secrecy jurisdiction' interchangeably, and recently produced a two-pager (as part of our Financial Secrecy Index) entitled What is a Secrecy Jurisdiction? which says exactly that, and explores ways to think about the phenomenon.

Take a look, too, at ActionAid's useful Tax Haven Tracker.

Also see The Independent reporting on this, along with the Press Association, and Metro.

Older reports, involving the use of companies in tax havens by Swiss, US, France, and the Netherlands, are here. Further information on Spain, is here.

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