Unlikely as the government would then have to subsidise the British tax havens when they lose all their business.

But the OECD only wants information to be available on request, rather than, as tax campaigners and many MPs want, automatically surrendered to the parent countries of the citizens and companies who bank there

Um, this is getting remarkably close in spirit to ‘if you’ve got nothing to hide, you’ve got nothing to fear’ – some intellectual consistency would be appreciated.

I met the estimable Richard Murphy of the Tax Justice Network (a real modern-day hero) when we were both blogging from the G20. He pointed out that effective taxation (ie, the eradication of tax avoidance and evasion) would enable, among other things, a world without development aid. The $410bn currently lost in tax revenue every year in developing countries would pay for the Millennium Development Goals eight times over. (Murphy, incidentally, has very little time for the Foot report.)

Brown has shown real integrity over the international development issue, building DFID into one of the best state development agencies in the world (from the corrupt mess left behind by the Tories in 1997). Yet he will not move on this incredibly significant issue. I’m baffled.

“He pointed out that effective taxation (ie, the eradication of tax avoidance and evasion)”

How many times? Tax avoidance is not only legal but deliberately written into the tax code, usually to provide incentives for particular areas of business. Not only do companies have a duty to their shareholders to minimise their losses through any route including tax but if they refused to avoid, (not, you’ll note, evade), taxation they wouldn’t be responding to the incentives that government want them to. So what Murphy is actually saying is that if you not only administer your tax system perfectly but also raise the level of taxation significantly you will collect more money in taxes, (of course, due to the Laffer effect you may not suceed even so).

“Gordon Brown was keen to put himself at the vanguard of the heroic assault on those foreign resorts”

Being of a somewhat cynical mindset, I suspect that what Gordon wants out of this is an end to tax competition so that there will be no escape from his grasping paws.

I’m aware of the difference, but thanks for the exposition – others might not be, I guess.

To clarify, the $410bn figure is evasion, not avoidance.

Rowan: He pointed out that effective taxation (ie, the eradication of tax avoidance and evasion) would enable, among other things, a world without development aid. The $410bn currently lost in tax revenue every year in developing countries would pay for the Millennium Development Goals eight times over. (Murphy, incidentally, has very little time for the Foot report.)

Do you have a source for the $410bn figure? It seems awfully high to me.

The other fallacy at play here is that the money involved (however much it actually is) is somehow ‘lost’ simply because it is not being spent by the governments of these countries! Presumably the 60% of income which the UK government does not manage to tax is similarly ‘lost’ – just think of all the things it could do with that cash… of course, what this analysis misses is the fact that the money is still being spent and used, just by private individuals rather than the state. What makes you think that the governments of the developing world (often not exactly models of good governance, to put it mildly) will be any more effective or spend the money better than how it is currently being spent?

Hi Dan – the source is Richard Murphy himself – he led a round-table discussion on the issue at a G20 briefing day. This link http://www.taxresearch.org.uk/Blog/2009/05/13/africas-missing-billions/ from his blog cites a slightly lower figure ($385bn p/a) from Foreign Policy.

Murphy’s explanation was that $160bn p/a is lost to developing country governments through transfer pricing abuse (there’s a well-regarded Christian Aid report substantiating that figure here: http://www.christianaid.org.uk/ActNow/the-big-tax-return/false-profits.aspx), and a further $250bn is revenue that developing country governments cannot collect from high net worth individuals who use tax havens.

As to whether the missing revenue would be of benefit to the world’s poorest countries – well, yes, I think it would. You’re quite right that not all developing country governments are models of probity. But it’s better that such states are encouraged to industrialise and develop with a significant measure of self-determination (for which effective taxation regimes are a necessity) than for them to rely on donor aid and highly conditional funds from the IFIs in perpetuity.

In theory, Gordon Brown could tear up the Cayman constitution and impose on it a UK-style tax regime.

Even if that is true, the Caymans could certainly declare independence.

So could the Isle of Wight, but they’re both under the suzerainty of Westminster. What’s your point? And it is true, by the way. Look it up.

This isn’t a rhetorical point. The Westminster government has complete discretion to intervene in the administration of these territories whenever it wants.

No, they couldn’t. These territories are Crown Dependencies, not colonies. There is disputed constitutional law as to whether the UK Government can intervene in the internal affairs of Crown Dependencies at all – they are not a part of the UK after all. If the British Government did try to make such radical changes to the economies of these territories, they would certainly resist legally and constitutionally. I believe some of them have contingency plans for UDI.

Understandably too: take away financial services from Guernsey, Jersey, the Caymans etc, and what is there left? They would be destroyed. In these circumstances, abjuring the military protection of the UK would be a small enough price to pay to avoid the total collapse of the economy – and what would the UK do in response? Invade?

I was initially puzzled by Gordon Brown’s apparent zeal for clearing up the tax havens in view of the fact that Britain runs more tax havens than anyone else (Jersey, Guernsey, the Bahamas, the British Virgin Islands, the Caymans, the Isle of Man, etc.) until I read a recent article in the German magazine “Der Spiegel” reporting on this aspect of the G20 summit. The summit agreed to classify tax havens “white, grey or black” according to how clean they were thought to be. Nobody made it into the black category. The Chinese, with Hong Kong and Macau, made it clear that they would not accept anything other then “white” status, or else. So in the end, the grey list was a very short one, most notably containing Switzerland and Luxembourg, and they were understandably rather miffed.

According to the same article, the run-up to the summit was marked by a sudden flurry of places like the Caymans signing agreements with other “states” as part of an overall effort to show that activity to clean up was underway. But these “states” were such well-known heavily populated financial centres as Greenland and the Faeroe Islands, i.e. like something out of a teenage philatelist’s wet dream.

Needless to say, none of this tedious detail was reported at the time and so could not get into the way of Gordon’s triumph. But at least he ticked another box.