Britain must clean up 'murky' tax havens to stop money leaving poor nations-campaigners

by Paola Totaro | @p_totaro | Thomson Reuters Foundation
Monday, 18 April 2016 18:08 GMT

An activist shows fake banknotes during a demonstration outside the European Commission (EC) headquarters ahead of statements by the EC on the effectiveness of existing measures against tax evasion and money-laundering in light of the recent Panama Paper revelations, in Brussels, Belgium, April 12, 2016. REUTERS/Yves Herma

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Activists said the Panama Papers leak has highlighted the way tax havens facilitated the theft of public funds

By Paola Totaro

LONDON, April 18 (Thomson Reuters Foundation) - Britain must lead the global clean-up of tax havens, shell companies and money laundering which has contributed to the loss of billions of dollars from developing nations and fraud in the land sector, according to anti-corruption campaigners.

Campaign group Global Witness and financial reform activists said the Panama Papers leak has highlighted the way tax havens, including those in Britain's overseas territories, let individuals and companies hide their identities - and money.

This has not only aided tax evasion but the theft of public funds, robbing nations of the proceeds of natural resources as well as the loss of capital which should have been spent on critical infrastructure such as schools, roads and hospitals.

British Prime Minister David Cameron will host an anti-corruption summit in London on May 12 with more than 40 national leaders in a bid to step up global action to "expose, punish and drive out corruption in all walks of life".

Land specialists meeting in London ahead of the May summit warned the land sector is one of the most fertile arenas for corruption with one in five people in Africa reporting paying a bribe for land services. They called for more investigation.

Global Witness' senior campaigner Rachel Owens told the Thomson Reuters Foundation the main message anti-corruption campaigners want to get across before the summit is Britain's need to focus on its own role and responsibilities.

"The UK needs to clean up its own backyard, not only because of the money lost through tax revenue but, just as importantly, for developing countries because ultimately, corrupt people need somewhere to put their dirty money and jurisdictions like these (offshore tax havens) and large western banks are key to that," she said.

"They bring the dirty money into the United States or British protectorates or tax havens and are welcomed with open arms ... this is a real issue."

DIRTY MONEY

Owens said there is an expectation that leaders attending the summit from the developing world, led by the Nigerian President Muhammadu Buhari, will attempt to focus attention on the West's role in aiding the secret movement of money globally.

"We understand Buhari is going to put the focus back on the role of developed nations ... maybe even mentioning the British overseas territories, the offshore tax havens which have been shown to be the places where stolen money is being laundered."

So far, global media coverage of the Panama Papers, described as the biggest leak in history, has focused less on African elites accused of corruption and more on high profile Western leaders.

Crime and corruption are draining a record $1 trillion a year from poor and middle-income nations, according to a 2014 report by U.S.-based watchdog Global Financial Integrity (GFI) that exposes financial corruption.

Sub-Saharan Africa has suffered the biggest loss as a share of its economy, with the disappearance of dirty money averaging 5.5 percent of GDP over the decade to 2012.

Among the high-profile Africans named in the Panama Papers are Khulubuse Zuma, a nephew of the embattled President of South Africa Jacob Zuma who was described as a representative of Caprikat Limited, an offshore company with oilfields in the Democratic Republic of Congo that is registered in the British Virgin Islands.

A spokesman said Zuma is not accused of owning an offshore account but association "with a company registered offshore".

Kenya's Chief Justice Kalpana Rawal was been linked in his national media to as many as 11 offshore companies in the British Virgin Islands.

He has denied any wrong-doing, saying the practice of running businesses or registering them in overseas territories is a legal and legitimate corporate practice in Britain.

While the leak has named individuals associated with tax havens, it has also highlighted that mechanisms to minimise tax legitimately can also be abused by those seeking to hide income.

This has prompted some countries to act to seal loopholes.

Cameron said last week he was tightening laws to end tax evasion, particularly in Britain's overseas territories, such as the British Virgin Islands and Cayman Islands, and Crown Dependencies, like Jersey.

In Australia, the federal taxation office has announced it is investigating more than 800 wealthy individuals accused of using offshore havens to avoid paying domestic tax.

But the head of Oxfam in Australia, Helen Szoke, said Australians and people around the world should not have to depend on leaks like this to reveal "a secret world of tax evasion and tax avoidance".

"Australia and other governments must act right now to make tax information public, instead of allowing tax havens and those that use them to continue operating in secrecy. All it takes is political will," she said in a statement.

(Reporting by Paola Totaro, Editing by Belinda Goldsmith; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit news.trust.org)

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