This is Tory tax haven policy – to make the UK a centre for the abuse of global capitalism at cost to the ordinary people of this country who will gain nothing from this move because Aon won’t be contributing hardly a bean for making use of the UK as the centre of its global non-taxation.

Yep, it's you-know-who, in an article he's entitled Tax haven UK is attracting business. And, challenged to explain just why he thinks it appropriate to refer to the UK as a tax haven, he refers us to the Financial Secrecy Index.

Where to start with all this? Well, let's start at the beginning. Firstly, it's clearly apparent that any measure of 'tax haven' that includes the UK must be complete bollocks. Include the UK, and you might as well include very country in the world. The UK has a long tradition of fairness, openness and transparency and any measure that fails to reflect that cannot be worth the paper it's written on.

And it all hinges on the Financial Secrecy Index work, produced by Ritchie's old friends the Tax Justice Network. Although he now claims to have no connection with TJN, they're still his mates, so their work can hardly be classed as independent. The only reference in the link Ritchie provides is to work co-authored by him. But what's the methodology of the FSI? It's the following:

The fifteen indicators used for scoring secrecy are:

Knowledge of Beneficial Ownership

1. Bank Secrecy: Does banking secrecy have a statutory basis and are banks required to collect and maintain adequate records about their clients
2. Registration of foundations and trusts: Can foundations and trusts be created and is there a public registry of foundations and trusts?
3. Recording of company ownership: Are details of the beneficial ownership of companies submitted to and kept updated by a competent authority?

Key Aspects of Corporate Transparency Regulation

1. Publication of company ownership details: Are details of company beneficial ownership maintained and made publicly available on the internet at reasonable cost?
2. Availability of company accounts: Does the jurisdiction require company accounts to be submitted to a public authority, and are these accounts made publicly available on the internet at reasonable cost?
3. Country-by-country reporting: does the jurisdiction require companies listed on the national stock exchange to comply with a country-by-country reporting standard?

Efficiency of Tax and Financial Regulation

1. Efficiency of tax administration: does the tax administration make use of taxpayer identifiers?
2. Taking measures to not promote tax evasion: does the jurisdiction apply a tax credit system for receiving interest and dividend income payments?
3. Fitness for information exchange: are all paying agents (e.g. banks, trust and foundation administers, etc.) required to automatically report payments to non-residents to the tax administration?
4. Harmful legal vehicles: does the jurisdiction allow the creation of cell companies, and are flee clauses for trusts prohibited by law?

International Standards and Cooperation

1. Anti money laundering measures: assessed on the basis of compliance with FATF standards
2. Provisions for automatic information exchange: does the jurisdiction participate in the AIE provisions of the EU’s savings tax directive, or does it offer a withholding tax alternative?
3. Bilateral treaty provision for information exchange: how many double tax agreements and tax information exchange agreements have been agreed?
4. International treaty commitments: including the 1988 Council of Europe/OECD Convention; 1988 UN Drug Convention; 1999 UN International Convention for the Suppression of the Financing of Terrorism; 2003 UN Convention Against Transnational Organised Crime; 2005 UN Convention Against Corruption;
5. International judicial cooperation: FATF recommendations 36, 37, 38, 39 and 40 relating to mutual legal assistance and other forms of cooperation

(I'm sorry, I had to renumber the criteria from the original 1-15)

And we can find elsewhere the report on the UK which gives the scores on the doors.

And that's your howler, right there. He's gone from a scoresheet under which the UK scores an excellent 11/15 "good" answers to a measurement that the UK is 45% tax haven and 55% transparent.  This simply cannot be right. Especially when you consider that one of the UK's "bad" answers is in not having full country-by-country reporting. No country has full country-by-country reporting because the idea is equal parts expensive, bonkers and useless (for why I think this, read this blog post I prepared earlier). Despite the UK's long tradition of the rule of law, compliance in full with global protocols robust tax enforcement, it's deemed to be 45% tax haven.

How the weighting actually works in practice isn't explained in their reports. But it's clearly a total load of nonsense.

What does this all prove? Not a lot, really, other than the extreme danger of believing seductively-printed reports that purport to have an academic justification but which, when you dig beneath the surface, are just a load of hokum. And, when Ritchie and others claim that the UK is a tax haven, you can tell them - with authority - to check their workings.

Elsewhere, Simon Cooke argues that we do really want the UK to be a tax haven.

People who read this post also read:

• Sometimes Ritchie shoots himself in the foot
• Ritchie is still getting it horribly wrong about Cameron Sr’s tax affairs
• That David Cameron family tax haven non-story in full
• Ritchie’s belt and braces approach to Amazon’s tax affairs
• HMRC’s view of country by country reporting

Filed under: Taxation with tags country by country reporting, idiots, richard murphy, simon cooke, tax havens, transparency, uk