Tax Havens No Longer?

Earlier this year the House of Commons passed legislation to require the British Overseas Territories to introduce Public Registers of Beneficial Ownership of Companies. Although Britain has already introduced these Registers, and the 27 European countries will do so by the end of next year, the proposition that our Overseas Territories should do likewise proved to be extremely controversial and was strongly opposed by the British Government. 

Faced with this, the Labour MP Dame Margaret Hodge and I organised a coalition across House of Commons of Conservative and Labour MPs, supported by the SNP, Liberal Democrats and Parliament’s Green Party MP, to oblige the Government to back down.

Dame Margaret numbers amongst her many political achievements the Chairmanship of the Public Accounts Committee (PAC) and a well-deserved reputation as a scourge of the over-mighty in the business sector. She and I teamed up to oblige the Government to accept this important reform. I had always believed from my international development experience that this change is essential if we are to crack down on money laundering and illicit money flows. In this case, as a former Government Chief Whip, I found myself in the somewhat awkward position of Gamekeeper turned Poacher. After all, the first rule of politics is to be able to count, and faced with the likelihood of a double-digit defeat on the floor of the House of Commons, the Government gracefully conceded. 

While this reform did not shake the political foundations nor excite the tabloid media, it does matter hugely. Margaret and I brought it forward because Britain’s Overseas Territories are at the heart of an international system in which anonymous companies shield their owners from accountability through a web of secrecy. It is the secrecy provided by these jurisdictions which enables the laundering of illicit financial flows — most egregiously from some of the world’s poorest countries. 

Desire for greater transparency and openness, coupled with a general clampdown on tax evasion, received a strong boost from the Coalition Government of 2010 with the introduction of the Bribery Act, as well as from the British G8 which championed a crackdown on tax havens. At that time, the stars in the firmament aligned – we had a British Minister of Finance keen to extract as much tax as possible to meet his public expenditure requirements, and a series of charities and NGOs, including Transparency International, Tax Justice and Global Witness, with the expertise and determination to ensure there should no hiding place for filthy lucre. My particular interest was bolstered by irritation at the amount of money – including from immense natural resources – stolen from Africa and Africans, while Margaret with her PAC experience was determined to crackdown on tax evasion. 

As our campaign intensified, delegations from the Overseas Territories complained about ​‘heavy handed neo-colonialism’ and an attack on their main source of business income. Others – with some justice – made the point that the terrible hurricanes which swept through the Caribbean had already dealt them a grievous blow from which they needed all their resources to recover. So we amended our plans to give them more time to implement these reforms. These need not now be completed before the end of 2020. 

Above all it was the release, as a result of high quality investigative journalism, of the Paradise and Panama Papers, that made clear for all to see that earlier arguments accepted by the Government were completely fallacious. 

Previously it had been argued by those opposed to Open Registers that the law enforcement and tax authorities had access through the Overseas Territories Governments that could secure relevant information within hours of requesting it. What the investigative journalists showed through the release of the Paradise and Panama Papers was that only the transparency of fully Open Registers would allow us to join up the dots . Then we would all be able to see clearly the complex web woven by powerful groups and individuals who conceal their ownership of dubious and laundered money. It was this above all that persuaded Parliament to act. 

At a time when populism does not encourage this sort of cross-party collaboration, and when narrow nationalism is on the march from Moscow to Cairo, international co-operation and bipartisan collaboration are at a premium. But the current composition of the British Parliament at Westminster does lends itself to cross-party co-operation. This is because we have a minority Government where power has passed from the Cabinet Room at No.10 over the road to the floor of the House of Commons. Small groups of MPs who find themselves opposed to Government policy can now reach across the aisle and can secure the changes they are seeking. But they will need a thick skin and no small measure of guile. 

Dame Margaret and I are now making our case for Open Registers of Ownership to the Governments of the three British Crown Dependencies (Isle of Man, Guernsey and Jersey). We will shortly complete our visits to all three for what have, so far, been constructive discussions. After all they share our Queen and trade under our flag; should they not also accept our values? In view of UK and EU compliance these Crown Dependencies would be well advised to follow suit. No-one wants to use the arcane governance methodology of an Order in Counsel to enforce Parliament’s will, but our Parliament has shown itself determined to introduce this greater transparency and openness to cut off the havens where corrupt people, war lords, bent politicians and Ministers all too often conceal their ill-gotten gains.