It is good news, if true, that the Treasury is finally acting to force UK-controlled tax havens to divulge the names of UK residents who hold (substantial) funds there in order to avoid tax. The US is bringing in a Foreign Account Tax Compliance Act (FATCA) next year which will require foreign banks to report US account holders to the US Inland Revenue Service.
It is now alleged that the UK is intending to introduce its own version of the American FATCA and that the Treasury has already drawn up plans to do so. This would certainly be the most incisive action against international tax avoidance yet undertaken by the UK authorities, but before tax justice campaigners (like me) get too excited, there are several caveats.
First, it would only apply to the UK Crown Dependencies (like Jersey, Guernsey and the Isle of Man) and UK Overseas Territories (like the Cayman Islands), so there would be plenty of time before the introduction of this measure in 2014 for multi-nationals and rich tax avoiders to move their money to other tax havens like Liechtenstein, Monaco or Switzerland.
Second, it didn’t require an American FATCA to be in place before a British version was wheeled out, so one has to ask: Why now? Maybe the huge anti-tax avoidance furore of recent months has prompted it, but if so, it hardly suggests a government with its heart in it.
Third, every other tax measure by Osborne has been designed to protect the mega-rich and the banks from from any additional tax imposition (indeed with the abolition of the 50p rate has cut their taxes) and to load almost the entire deficit-cutting burden on middle and low incomes, whilst ostentatiously excluding the rich from any liability. So why the change, if change there is?
Fourth, and perhaps most seriously, since Cameron has condemned aggressive tax avoidance as ‘morally repugnant’, why is the government now itself promoting aggressive tax avoidance by cutting the tax on multi-nationals that open a finance company in a tax haven (via changes to the Foreign Controlled Companies tax regime due to come into force in 2013-14) from the current 23% to just 5.75%? Or is the idea that multi-nationals shouldn’t need to bother with tax avoidance because the government will serve it up to them on a plate?
