The UK Is Approaching the Top 10 Secretive Financial Systems According to the Tax Justice Network

The Tax Justice Network (TJN) is known for its work in fighting tax secrecy and tax havens. Recently, the organization reported that the United Kingdom is climbing up higher on its list of tax havens. The country is approaching a spot among the top 10 rankings of secretive financial systems.

The Financial Secrecy Index

This information is based on the most recent version of the Tax Justice Network’s financial secrecy index. That index ranks countries based on their financial sectors, specifically the secretiveness and size of those sectors. The rankings are published every two years.

In the previous rankings, the United Kingdom ranked at number 23, which was relatively high on the list. In the most recent rankings, however, released in February 2020, the country is now in No. 12, out of the total of 133 countries on the list.

The Concerns

The Tax Justice Network did not merely release these new rankings without any commentary. As always, it provided reasoning for the higher positioning of the United Kingdom on its most recent financial secrecy index.

According to TJN, there are some significant concerns about the strategy the UK has in place in the post-Brexit world.

Additionally, John Christensen, the founder and director of the Tax Justice Network, indicated that the ranking of the United Kingdom shows a larger problem. He noted that it raised significant concerns regarding its financial transparency policies after departing from the European Union.

There are specific concerns about the idea of a “Singapore-on-Thames” strategy for the City of London. This could potentially turn the city and the country into a lightly-regulated and low-tax hub for businesses and individuals. This is the exact opposite of what the TJN looks for in terms of transparency.

The UK’s rise on the list comes as a sharp contrast to its excellent performance in 2016. Christensen said that the country demonstrated “true world leadership” that year. The UK was the first country that adopted a beneficial ownership register of a public nature for domestic companies. He went on to indicate that the country has undone all of that progress.

Other Reasons for the Poor Performance

According to TJN, the poor performance of the UK on the 2020 rankings is also due to the more rigorous methodology. The previously-mentioned concerns also played a key role, as did historical changes made to the reporting rules regarding the information that multinational corporations must provide on international operations.

The TJN’s Call for Action

In addition to releasing the updated financial secrecy index, the Tax Justice Network called for sanctions against various countries on the list, which ranked highly. Specifically, its call for action focuses on the countries that it says “backslid” in terms of transparency since the evaluation in 2018. This includes the UK as well as the Cayman Islands and the US.

The Tax Justice Network has called for sanctions against these “backsliding” countries. At the same time, it praised the efforts of other countries who have been open and transparent in the financial sector. Those countries that the organization appreciated have taken steps such as sharing information regarding non-resident taxpayers automatically.

What Others Say

It should come as no surprise that an HM Treasury spokesman indicated that there are no new corporate reporting rules that should account for the changed ranking. The spokesman stated that it continues to be part of the global push for tax transparency and to act as a leader in the drive.

Other Rankings of Note

For those interested, the 2020 Tax Justice Network financial secrecy index ratings are as follows: No. 1 Cayman Islands, followed by the US, Switzerland, Hong Kong, and Singapore. Luxembourg is at No. 6, followed by Japan, the Netherlands, the British Virgin Islands, the United Arab Emirates, Guernsey, and the UK.

Sources:

https://www.theguardian.com/world/2020/feb/18/uk-climbs-ranking-of-tax-havens-campaign-group-warns