The Guardian’s Panama and Paradise Papers investigations confirmed what had long been rumoured: tax havens, and the rules of financial secrecy that underpin them, have enabled the world’s financial elite to hide their cash away from public scrutiny, to the detriment of us all.
Yet we in Britain cannot claim to be innocent bystanders. Though we have long led the way on international efforts to clamp down on money laundering and cross-border crime, half of the 240,000 shell companies used by the Panamanian law firm Mossack Fonseca to help the wealthy dodge tax were incorporated in the British Virgin Islands.
This overseas territory proudly flies the union jack as part of its flag, boasting as its motto Vigilante (“Be vigilant”). Yet it appears to have looked the other way as the world’s financial elite used its legal structures to hide their wealth from prying eyes.
The BVI are far from alone. Jersey, Guernsey, the Isle of Man, Bermuda and the Cayman Islands are on the EU greylist of uncooperative tax jurisdictions. If they do not cooperate further, they may be placed on the blacklist.
We should regard it as a matter of national shame that the crown dependencies and overseas territories that fly our flag give shelter to the wealth of the world’s financial elite. But we should be angry.
HMRC’s figures from 2015-16 showed that 6% of tax due in Britain went uncollected – a whopping £34bn. About £1.7bn of this came from avoiding tax by taking legal steps to minimise one’s liability and an estimated £5.2bn came from evading tax illegally. With our public finances strained, it is an insult to diligent taxpayers that multinational firms and high-net-worth individuals can use a complex myriad of loopholes and accounting gymnastics to minimise their tax bill.
That’s why parliament – and government – need to get a serious handle on this problem. Over the next six months, I will be chairing a Treasury subcommittee inquiry into avoidance and evasion, aiming to unpick the failures of policy and resourcing that have allowed the tax base to be undermined. We need to be sure that HMRC attracts the best and the brightest, who will be dogged and determined in making sure everyone pays what they owe, and has the resources it needs from government.
We’ll be pressing government hard, too. Ministers need to account for the holes in the tax system. They also need to explain how the relationship with crown dependencies and overseas territories works, and how they can clamp down. I want to hear from the dependencies and territories themselves.
It was the great Labour prime minister Clement Attlee who wrote: “If a rich man wants to help the poor, he should pay his taxes gladly.” Never has that been more true than today.
• John Mann is Labour MP for Bassetlaw and chair of the Treasury subcommittee
