An international deal to crack down on secretive tax havens is in jeopardy after the British Crown Territory of Bermuda refused to sign up to new transparency rules.
Tax avoidance had been placed top of the agenda for the G8 summit of world leaders meeting next week in Northern Ireland, and David Cameron has called Britain’s 10 overseas territories and crown dependencies to talks on the topic in London this Saturday.
The Prime Minister had hoped to persuade them to agree to a new convention drafted by the Organisation for Economic Co-operation and Development (OECD) to give momentum to his drive for transparency. But the plan is now in doubt.
Mr Cameron and the Chancellor George Osborne have been pushing hard for the British territories to give ground. But the Foreign Office is thought to share the islands’ concerns that major sources of their income will be harmed as they are disadvantaged against offshore competitors in Asia.
Craig Cannonier, the Prime Minister of Bermuda, said: “My understanding is that we are not here to sign something, but simply to agree that everyone needs to get on par.”
He added that the OECD proposals had potentially damaging elements for Bermuda. “There’s some clauses in there that we need to look at, that may need to be adjusted,” he told Reuters. “Our finance ministry is going over it with a fine-tooth comb.”
His statement may encourage others to follow suit and could allow G8 members sceptical about the Cameron plan – such as the United States, Russia and Canada – to tell him to put his own house in order first.
Bermuda has been accused of allowing tax avoidance by multinational firms. The territories – which include the Cayman Islands, the British Virgin Islands and the Turks and Caicos Islands – agreed in May to share taxpayer information with the UK, France, Germany, Italy and Spain, but the OECD convention covers more countries and more information.
Murray Worthy, tax campaigner at the protest group War on Want, said: “Bermuda’s rejection... shows that Cameron’s tough talk of taking on tax havens is just that – talk. If Cameron was actually serious about tackling tax havens, he could simply legislate... [he] has chosen to invite the UK’s own tax havens to sign a deal that only tinkers at the edges of their secrecy.”
He added: “It is an outrage that many of the world’s most significant tax havens that are used to dodge taxes around the world are British. ”
Ministers played down the setback, insisting a majority of the 10 nations intend to sign the convention and they had all pledged to draw up an action plan to disclose who owns and controls companies based in their countries.
As The Independent revealed, Mr Cameron may not secure his aim of persuading the G8 nations to produce “beneficial ownership” registers open to the public. Instead, the summit may agree to leave it up to individual countries to decide whether to limit access to such registers to tax and law enforcement authorities. British officials insist that would still be a breakthrough as it would boost global efforts to crack down on money laundering, tax evasion and terrorist activity aided by tens of thousands of anonymous “shell companies.”
Officials insist progress will be made at the G8 but there are signs Britain is lowering its expectations.
Aid groups welcome Mr Cameron’s transparency drive but believe he has left it very late to broker a G8 deal. Diplomatic sources agree, saying that the prospect of a breakthrough would be greater if the UK was not relying on a last-minute push.