11/03/09 Brown and tax havens – Treat ’em mean

11/03/09 Brown and tax havens – Treat ’em mean

Editorial: The Guardian
However slowly, however piecemeal, progress is being made in forcing tax havens to become less secretive. Yesterday it was the turn of Jersey to sign an agreement with the UK that it will share information about offshore tax payments. Gordon Brown has been sounding tougher too. In his address to US Congress last week was this remarkable sentence: “How much safer would everybody’s savings be if the whole world finally came together to outlaw offshore tax havens?”

An excellent question, even if the person raising it comes as rather a surprise. This is after all the same Gordon Brown who barely did anything about tax havens during his decade as chancellor. Indeed, while Mr Brown was in Number 11, the International Monetary Fund effectively branded Britain a tax haven on account of its lax rules on rich non-domiciles. Sinners can repent, of course, but to be truly convincing they must reform. And of that there is not yet enough evidence. The tax-information exchange agreement with Jersey may be less significant than it appears. Seasoned campaigner Richard Murphy observes that the Cayman Islands, which has a similar agreement with the US, only budgets for around 120 enquiries a year. That is a tiny number considering how much money flows between the US and the Caribbean tax haven. Nor are the UK authorities being quite as tough as they make out. When officials discuss the agenda for next month’s G20 summit, it is clear that they are relying on others – whether that be the US, Germany or France, or the rich-countries club of the OECD – to take the lead in the havens debate, with the UK following some way behind.

So any optimism must be heavily qualified – but there should still be optimism, for three reasons. The first is that the political climate is different. The US now has a president who is determined to crack down on tax havens, and the financial crisis has emboldened those European leaders who have long wanted action. Mr Brown has cover for his new-found radicalism. The second is that the financial crisis is helping to make the case against offshore tax dodging. As officials and expert outsiders are able to examine the detritus of the securitisation boom, they are finding strong evidence of how much of it was driven by the tax advantages of using offshore havens.

Finally, there is an economic imperative – governments are spending vast sums, even while their revenues are being hit by the recession. The search is on for more ways to raise cash, even if that means a shake-down of tax havens. A fairer tax system is not inevitable, but the conditions to create one could not be more propitious.

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