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Thursday
Jun182009

Amount of countries with corporate tax advantages are running low

The signing of the latest double taxation treaty between the UK and Cayman Islands shuts another door on businesses and multinational companies who want to keep the taxman’s prying eyes off their financial affairs.

Entrepreneurs and small businesses seeking to pay less tax might now consider moving to countries with low corporation tax and flexible business regimes, like the UK and Eire, as many former offshore tax havens have now signed OECD (Organisation for Co-operation and Economic Development) agreements.

The UK now has double taxation treaties and tax information exchange agreements in force with more than 100 countries, including most of the traditional Caribbean tax havens – and more are expected to follow.

This means these former safe havens now exchange financial information with tax authorities making up the OECD and G20.

In the eyes of the major nation’s tax authorities, setting up in a tax haven is a signal that a business may be trying to flout tax responsibilities.

Other double taxation agreements with the UK that are expected soon include Liechtenstein and Switzerland.

Financial Secretary to the Treasury Stephen Timms signed the Cayman Islands agreement on June 15.

“Information exchange is a vital tool in ensuring that governments receive the revenues they need to resource the essential public services on which we all depend," he said.

“I would like to congratulate the Cayman Islands Government for signing up to an arrangement which includes unprecedented provisions for tax information exchange that meet international standards of transparency.”

"The game is up. People are realising that if they want to be part of the global economy they have to be willing to exchange information on tax."

He also used the treaty signing as a platform to announce that the UK is backing OECD and G20 calls to make multinational companies reveal how much tax they pay in each jurisdiction where they operate.

G20 ministers meet in Berlin next month to discuss country-by-country reporting by companies who do not currently have to disclose the tax they pay or profits they make in many countries.

Organisations and campaigners for third world countries welcome the move, but strong resistance is expected from international mining firms, which have long been suspected of negotiating secret deals that deny developing countries huge sums in lost revenue from mining their natural resources.

David McNair, of charity Christian Aid, said: "We see country-by-country reporting as a key mechanism for developing countries so they have the information they need to identify companies that dodge tax and to ensure they have enough money to invest in health and education."

The Berlin G20 meeting is an "exchange of information" to build on the London summit earlier in April, where Gordon Brown promised to crack down on tax secrecy.

The prime minister put British overseas tax havens under pressure following the meeting when he wrote to the heads of all British crown dependencies and overseas territories requesting that they end their culture of secrecy by September or face sanctions.

The UK is also publishing a code of practice for banks to crack down on the use of tax havens by major banking groups. 

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