British overseas territories top corporate tax loophole index

FRANKFURT, May 28 (Reuters) - Britain’s offshore territories the British Virgin Islands (BVI), Bermuda and the Cayman Islands were named in a study released on Wednesday as the most significant jurisdictions used by global companies to minimise their tax bills.

Governments are stepping up efforts to recoup more tax from multinationals, with the European Commission forcing iPhone maker Apple to repay 13 billion euros after it used Ireland to cut its tax on European profits to almost zero.

The Tax Justice Network, a group campaigning for transparency, said its study measured multinational activity in each country in 2017, as well as tax rates and loopholes.

While tax evasion is illegal, companies are not forbidden from reducing their bills by taking advantage of loopholes such as moving profits through countries or territories that impose lower taxes, including those with close legal ties to Britain.

A British government spokesman said tackling tax avoidance was a priority and that the country had “been at the forefront of international action to reform global tax rules”.

British overseas territories were committed to tax transparency standards, the spokesman added. Andy Burrows, CEO of Bermuda’s Business Development Agency, said it met global standards. “Bermuda is not a place to hide capital,” he added.

John Christensen of the Tax Justice Network said the findings showed why Britain should not compete more aggressively on tax, as some politicians have suggested it could after it leaves the European Union.

“This (low tax) model would involve ... engaging in a race-to-the-bottom on corporate tax rates,” he said.


Officials from more than 100 countries, including Britain, India and the United States are gathering this week under the umbrella of the Organisation for Economic Cooperation and Development, which sets tax standards, to discuss reform.

They are debating how countries can tax multinationals which route money through offshore centres, heralding changes that could make it easier to tax them outside their home country.

Tax Justice Network’s model assigns each country an index value, calculating this using its share of global cross-border investment, combined with an assessment of characteristics such as the number of tax loopholes it offers.

It calculates that 2.1% of $45 trillion of total cross-border investment in 2017 went through the BVI, which are close to Puerto Rico and have a population of roughly 30,000.

The Tax Justice Network analysis also highlights the Netherlands, Switzerland and Luxembourg, which it ranked fourth, fifth and sixth in helping to cut corporate tax bills.

Unlike the British territories that have a zero tax rate for companies, those countries say they impose a levy of more than 20 percent. However the study found instances where companies paid less than 3 percent.

Responding to the ranking, a Swiss government spokeswoman said it respected international standards, adding that a referendum this month voted to abolish tax privileges for companies that operate predominantly internationally.

Luxembourg’s finance ministry said it had been “fully committed in the global fight against fraud and tax evasion”.

The British Virgin Islands and Cayman Islands did not respond to requests for comment, while the Dutch government declined to comment because it had not seen the study.

A study published last year by the International Monetary Fund that showed how multinationals made $12 trillion of "phantom" investment in "empty corporate shells". (Reporting by John O'Donnell; Editing by Alexander Smith)