The Tax Justice Network has branded the UK and a handful of OECD countries as the leading enablers of corporate tax avoidance. The new ‘corporate tax haven index’ identifies the following ten jurisdictions as responsible for 52% of the world’s corporate tax avoidance risks:
British Virgin Islands (UK);
Bermuda (UK);
Cayman Islands (UK);
Netherlands;
Switzerland;
Luxembourg;
Jersey (UK);
Singapore;
Bahamas; and
Hong Kong.
The index scores each country’s tax system based on the degree to which it enables corporate tax avoidance. Each country’s corporate tax haven score is then combined with the scale of corporate activity in the country to determine the share of global corporate activity put at risk of tax avoidance by the country.
The Tax Justice Network says the corporate tax haven index provides evidence of the discrepancy between the statutory corporate tax rates that countries advertise and the ‘real, legally documented, lowest corporate tax rates’ on offer. The ‘lowest available corporate income tax rate’ measured by the index takes into account lower rates as evidenced in territorial tax systems exempting foreign income, sectoral exemptions in four or more economic sectors, admissive holding company tax regimes or exempt types of company, exemptions upon distribution or retention of profits; and documented tax rulings.
Tax Justice Network chief executive, Alex Cobham, brands the UK, the Netherlands, Switzerland and Luxembourg the ‘axis of avoidance’, who ‘on average have offered corporate tax rates of 3% or less’. The lowest available corporate tax rates offered by the top ten averaged 0.54%.
These top ten jurisdictions together account for 40% of global foreign direct investment reported by the IMF. The Tax Justice Network estimates the amount avoided by multinational corporations annually at $500bn, which it says is a more conservative estimate than the $600bn reported by the IMF.
The index also singles out the United Arab Emirates (UAE), the UK and France as the most aggressive in driving down withholding tax rates in low-income and lower-middle income countries through tax treaties. The top ten most aggressive countries in this regard are:
UAE;
UK;
France;
Switzerland;
Netherlands;
Sweden;
Ireland;
Spain;
Cyprus; and
Austria.
Among OECD countries ranked by the index, 72% of treaties negotiated with low-income and lower-middle income countries secured reductions in withholding tax rates to below the average withholding tax rates offered by those countries. The OECD countries on average were 41% more aggressive than non-OECD countries towards low and lower-middle income countries.
However, the usefulness of the report was questioned by Dan Neidle, tax partner at Clifford Chance. 'Like most such league tables (whether of universities or pop stars), this report puts some subjective numbers into a subjective formula and then presents the results as objective,' he said.
'Also like most such tables, it combines the obvious with the questionable. Yes, the Cayman Islands, Bermuda and the BVI are tax havens (an unsurprising finding given they don't tax corporate income or gains). But ranking countries as tax havens because they have capital gains exemptions, permit service payment deductions, or don't have public CBCR? That reflects nothing but TJN's own rather idiosyncratic policy preferences. So as a piece of PR it's a great success, but it doesn't advance anyone's understanding of the challenges facing the international corporate tax system.'
The Tax Justice Network has branded the UK and a handful of OECD countries as the leading enablers of corporate tax avoidance. The new ‘corporate tax haven index’ identifies the following ten jurisdictions as responsible for 52% of the world’s corporate tax avoidance risks:
British Virgin Islands (UK);
Bermuda (UK);
Cayman Islands (UK);
Netherlands;
Switzerland;
Luxembourg;
Jersey (UK);
Singapore;
Bahamas; and
Hong Kong.
The index scores each country’s tax system based on the degree to which it enables corporate tax avoidance. Each country’s corporate tax haven score is then combined with the scale of corporate activity in the country to determine the share of global corporate activity put at risk of tax avoidance by the country.
The Tax Justice Network says the corporate tax haven index provides evidence of the discrepancy between the statutory corporate tax rates that countries advertise and the ‘real, legally documented, lowest corporate tax rates’ on offer. The ‘lowest available corporate income tax rate’ measured by the index takes into account lower rates as evidenced in territorial tax systems exempting foreign income, sectoral exemptions in four or more economic sectors, admissive holding company tax regimes or exempt types of company, exemptions upon distribution or retention of profits; and documented tax rulings.
Tax Justice Network chief executive, Alex Cobham, brands the UK, the Netherlands, Switzerland and Luxembourg the ‘axis of avoidance’, who ‘on average have offered corporate tax rates of 3% or less’. The lowest available corporate tax rates offered by the top ten averaged 0.54%.
These top ten jurisdictions together account for 40% of global foreign direct investment reported by the IMF. The Tax Justice Network estimates the amount avoided by multinational corporations annually at $500bn, which it says is a more conservative estimate than the $600bn reported by the IMF.
The index also singles out the United Arab Emirates (UAE), the UK and France as the most aggressive in driving down withholding tax rates in low-income and lower-middle income countries through tax treaties. The top ten most aggressive countries in this regard are:
UAE;
UK;
France;
Switzerland;
Netherlands;
Sweden;
Ireland;
Spain;
Cyprus; and
Austria.
Among OECD countries ranked by the index, 72% of treaties negotiated with low-income and lower-middle income countries secured reductions in withholding tax rates to below the average withholding tax rates offered by those countries. The OECD countries on average were 41% more aggressive than non-OECD countries towards low and lower-middle income countries.
However, the usefulness of the report was questioned by Dan Neidle, tax partner at Clifford Chance. 'Like most such league tables (whether of universities or pop stars), this report puts some subjective numbers into a subjective formula and then presents the results as objective,' he said.
'Also like most such tables, it combines the obvious with the questionable. Yes, the Cayman Islands, Bermuda and the BVI are tax havens (an unsurprising finding given they don't tax corporate income or gains). But ranking countries as tax havens because they have capital gains exemptions, permit service payment deductions, or don't have public CBCR? That reflects nothing but TJN's own rather idiosyncratic policy preferences. So as a piece of PR it's a great success, but it doesn't advance anyone's understanding of the challenges facing the international corporate tax system.'
