UN report shows increased channelling of company funds into offshore tax havens such as the Cayman and British Virgin islands
THE UNITED NATIONS has called upon governments to combat the flow of investment to offshore tax havens, after research found that countries with low tax rates received $221bn (£152bn) from companies last year.
Unctad (the UN Conference on Trade and Development) also ranked Britain as the third most popular destination for countries that looked to avoid tax in 2014, with Luxembourg and the United States ranking above them.
The UN think tank found that the Cayman Islands and the British Virgin Islands received $72bn worth of investment from businesses looking to avoid taxes, most notably companies in Russia, China, the US and Hong Kong.
The UN has now highlighted the need for governments to crackdown on companies using offshore nations to avoid paying taxes.
“Revelations that firms large and small have been using offshore financial centers and jurisdictions to evade or avoid taxes have provided additional impetus to policy reforms,” the UN report highlighted.
“The persistence of investment flows routed through offshore finance centres, as well as the level of profits booked in these jurisdictions, highlight the pressing need to create greater coherence among tax and investment policies at the global level.
“More efforts are indeed necessary, and the persistence of investment flows routed through offshore finance centers, as well as the level of profits booked in these jurisdictions, highlight the pressing need to create greater coherence among tax and investment policies at the global level. A lack of coordination between these two crucial policy areas will limit positive spillovers from one to the other, limiting potential gains in tax compliance as well as productive investment.”
The UN did note however that progress has been made to increase international cooperation in tax affairs, citing the G20/OECD BEPS initiative which was launched in 2013.
The report comes just weeks after the Panama papers scandal hit the world’s media, uncovering the Central American country as a tax haven for the rich and powerful.
Since the data leak tax authorities and heads of state have been under pressure to combat widespread tax avoidance, with prime minister David Cameron recently pushing through legislation that introduces a new criminal offence for corporations that fail to take adequate steps to prevent the facilitation of tax evasion.