The UK’s 100 biggest public companies are running more than 8,000 subsidiaries or joint ventures in onshore and offshore tax havens, according to research published on Monday (12MAY), raising fresh concerns about the full extent of corporate tax avoidance.
The figures, published by the charity ActionAid, show that only two of the companies listed on the UK’s FTSE 100 have no subsidiaries in tax havens - while companies such as Barclays and Tesco own hundreds.
Corporate use of offshore subsidiaries has been roundly criticised by tax campaigners as a tactic to legally reduce corporate tax bills, with Vodafone, Starbucks and Amazon attracting widespread protests and criticism from MPs.
David Cameron has pledged to put tackling the issue of tax avoidance and offshore secrecy at the heart of next month’s G8 summit, which Britain chairs this year.
Speaking after Saturday’s meeting of F7 finance ministers, the chancellor, George Osborne, said international action was needed, adding it was “incredibly important that companies and individuals pay the tax that is due”.
However, many of the offshore jurisdictions used by the FTSE 100 have close ties to the UK, illustrating the challenge facing Cameron and Osborne ahead of negotiations with other G8 leaders.
In total, FTSE 100 companies have 1,685 subsidiaries in UK Crown dependencies such as Jersey, or overseas territories such as the British Virgin Islands (BVI), Bermuda and Gibraltar.
The Treasury recently secured a deal to share more information on potential income-tax evaders operating out of British overseas territories. But campaigners warn that agreements so far do little to tackle offshore corporate secrecy and structures.
The research also compiled data covered by a wider definition of tax haven, including onshore jurisdictions such as the US state of Delaware - accused by the Cayman islands of playing “faster and looser”even than offshore jurisdictions - and the Republic of Ireland, which has come under sustained pressure from other EU states to reform its own low-tax, light-tough, regulatory environment.
By this measure, the UK’s biggest public companies keep a total of 8,311 subsidiaries in tax havens - more than one in three of all the FTSE100’s 22,042 foreign subsidiaries, associates and joint ventures.
The figures show that banks are the most prolific user of havens with the big four - Barclays, HSBC, the Royal Bank of Scotland, and Lloyds - among the top 10.
Barclays said in 2011 it was working to cut the number of its offshore subsidiaries in the Caymans, but the research shows it still had more than 120 subsidiaries in the Caribbean territory, along with dozens of others in other overseas jurisdictions with low tax rates or limited disclosure rules to other tax authorities.
Lord Oakeshott, the Liberal Democrat peer, who resigned as the party’s Treasury spokesman after criticising the government’s deal on banking regulation as “pitiful”, said the research showed new measures on tax havens were needed.
He said: “Tax transparency must start at home. ActionAid’s devastating research makes us ashamed to be British. Far too many of Britain’s top companies wash billions of profits through pipelines of British tax havens to vanish behind shiny brass plates in shady places.
“Cameron and Osborne can’t strut the world stage as fair tax crusaders until they end this tax abuse, starting with the banks we own, RBS and Lloyds."
But use of offshore jurisdictions extends far beyond the banking world. Food manufacturers, retailers, and drinks firms were among the FTSE 100 companies using offshore jurisdictions.
The retailer with the most subsidiaries in countries dubbed tax havens was Tesco, which had 107, often tied to its financial services provisions. These included eight firms based in Jersey, nine in the BVI, and 14 in the Cayman Islands.
Particular concern is expressed by campaigners about the cost of offshore tax deals to the populations of developing countries.
For instance, Tullow Oil, which describes itself as “Africa’s leading independent oil company”draws 84% of its revenues from the continent, but only four of the 81 companies it lists as subsidiaries are registered in African countries. By contrast, more than half (47) are registered in tax havens including the BVI, St Lucia, the Channel Islands and Netherlands.
Three-quarters of these tax haven companies refer to developing countries, such as Liberia, Kenya, Malawi and Sierra Leone, in their names.
While the countries highlighted by the ActionAid study have been targeted because of their rules on secrecy or tax management, a company’s presence in such countries does not mean they are necessarily engaging in such practices.
There is no suggestion that any of the FTSE 100 firms have engaged in practices in contravention of tax laws.
Mike Lewis, ActionAid’s tax justice policy adviser, who did the research, called tax havens “one of the biggest hidden obstacles”in the fight against global poverty.
He added: “Poor countries lose three times more money to tax havens than they receive in aid each year.
“Tax haven structures are almost universal amongst the UK’s biggest multinationals and becoming ever more common for investments in developing countries.
“When David Cameron chairs the G8 summit in Northern Ireland next month he must deliver on his promise to call time on tax havens for the benefit of all countries, rich and poor."
The two FTSE 100 companies found to have no subsidiaries in tax havens were the mining group Fresnillo and the financial advice business Hargreaves Lansdown.
A spokesperson for Tullow Oil said the company did not avoid tax and did not use companies in tax havens to avoid tax, adding: “Our clear aim in tax planning is to ensure that the appropriate amount of tax is paid in the jurisdiction in which the activities are undertaken.
“As such, no country in which we operate is losing out because some of the companies that we own are located in tax havens."
Seven of its subsidiaries were dormant with no profits and were scheduled for elimination while five were holding companies with minimal activity, he added.
A Barclays spokesperson said the company was among the UK’s top taxpayers and acted ethically.
She said: “This story is based on misconception and is misleading. Delaware is not a low-tax jurisdiction. Profits in the state are subject to US corporate tax at 35%, as well as Delaware state tax.
“Barclays has substantial businesses in many of the jurisdictions mentioned.
“In the Caymans virtually all of the profits generated in these companies are subject to corporate tax at the UK corporate tax rate. “The number of Barclays’ entities in low-tax jurisdictions reduced from 339 in 2009 to 252 by February 2013 - a 26% reduction. We plan to make further reductions in 2013."
A Tesco spokesperson said: “We are one of the largest payers of tax in the UK. In the year ended February 2012 we contributed GBP1.5bn directly, including GBP519m in corporation tax. We do have a number of companies within low-tax jurisdictions, but these are all either holding companies, dormant, registered for UK tax, or subject to controlled foreign company regulations and agreed with HMRC [UK tax authorties]."
While measures have been taken already to crack down on the separate issue of tax avoidance by individuals, campaigners have repeatedly said that without steps to tackle corporate activities in havens action will be futile.