Britain has a historic responsibility to back global attempts to properly regulate the world of offshore financial centres
Britain created a loophole that made it a tax haven less than a century ago, when the House of Lords ruled in a case involving a UK company that traded in Egyptian land. The 1929 decision allowed foreigners to set up companies in the UK that would not be considered UK resident under British law because they were controlled from overseas. Crucially, they could be shielded from taxation at source because they were incorporated abroad. That judgment sent history scurrying towards the creation of an “offshore world” of tax havens through which nations compete to offer the least possible corporate tax and the greatest possible secrecy.
This system could be coming to an end. Over the next three weeks, 193 UN member states in New York will thrash out draft terms of reference for a convention that seeks the biggest overhaul of global tax rules for a century. Many countries, led by the African Group, are seeking a right to tax economic activity where it takes place. If enacted, this could see the convention, legally binding on contracting states, to require multinational corporations to pay tax where they employ staff and do real work, instead of in tax havens where they hide profits.
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