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Joe Powell (Kensington and Bayswater) (Lab)
I beg to move,
That this House has considered tax transparency in the Overseas Territories.
It is a pleasure to serve under your chairship, Mr Turner. Having worked on anti-corruption, open government and transparency issues for more than a decade, I am often asked why such issues matter when there are so many pressing challenges facing our country. It can often seem an intractable problem—billions and trillions flowing through the international financial system that will end up elsewhere. What difference does it make to our constituents? I hope this debate will show directly why it matters to our Treasury and our tax take; to the housing crisis; to the fight against organised crime; to the enforcement of our sanctions against Putin; to fighting poverty around the world; and to restoring trust, transparency and accountability to our democracy.
This Government have made a strong start on combating illicit finance and kleptocracy. I particularly welcome the Foreign Secretary’s personal campaign on this issue, which has seen an expansion of our sanctions, the appointment of Baroness Hodge as the UK’s anti-corruption champion, and a cross-departmental team of Ministers charged with developing a new anti-corruption strategy, to which I know my hon. Friend the Exchequer Secretary to the Treasury has a strong commitment.
The Foreign Secretary’s ambition to transform Britian from the dirty-money capital to the anti-corruption capital of the world is absolutely the right objective. It matters for our international reputation and our standing in the world. To be taken seriously as a leader on democracy and anti-corruption, our own house has to be in order. The uncomfortable truth is that while some of the most notorious and brazen enablers of illicit finance and money laundering are operating as part of the UK family, we will not be able to claim that leadership role. Despite years of warm words and communiqués about fighting economic crime, the overseas territories are still one of the premier global destinations for moving dirty money, and it is time for that to change.
Since the full-scale invasion of Ukraine in 2022, I have led the local Kensington Against Dirty Money campaign in my constituency of Kensington and Bayswater, where more than 6,000 properties are owned overseas. Our most popular activity is a local kleptocracy tour of often empty mansions owned by autocrats and their supporters from around the world. Transparency International found that £5.9 billion in suspicious funds had been used to purchase UK properties through shell companies registered in the overseas territories, with £1.1 billion of that in my constituency. The ownership vehicle of choice is an anonymous trust, with the most popular location being the British Virgin Islands. The BVI has a population of less than a quarter of my constituency, so it would be highly surprising if BVI residents were the beneficial owners of the properties.
Thanks to investigative journalists and a series of high-profile leaks from the Panama and Paradise papers to “Cyprus Confidential”, we know who the actual owners are. That is why the previous Government—with thanks to the right hon. Member for Sutton Coldfield (Mr Mitchell)—took action in the previous Parliament with cross-party support to implement a register of overseas entities. That gives us good and helpful information, but a glaring loophole remains. Trust-owned property does not need to be declared—and in the Royal Borough of Kensington and Chelsea that accounts for 40% of the foreign-owned property. That allows the UK property market to continue as a laundromat for illicit finance. I ask the Government to look at closing this loophole and adding trusts to the property register as soon as possible.
Alex Sobel (Leeds Central and Headingley) (Lab/Co-op)
Does my hon. Friend agree that without those actions there is a real danger that significant sums of Russian assets and money, which could be sanctioned and used to reconstruct Ukraine, will be left in the hands of the supporters and perpetrators of the war in Ukraine?
Joe Powell
I completely agree. Without transparency, we cannot follow the money. We have some prominent examples of properties owned by sanctioned oligarchs that came into the sanctions regime only after investigations uncovered those assets. Keeping the anonymous trust option available, without the requirement to declare the true owners, allows for exactly the sort of behaviour that my hon. Friend outlines.
The main opposition is from some highly self-interested trust lawyers, so I urge the Government to take on those claims and bring trust-owned property into the register, which would help us not only to fight economic crime but to revitalise our high streets, where buildings often sit empty because enforcement action cannot be taken when the true owners cannot be tracked down. Indeed, some of my constituents were evicted using a spurious section 21 notice by an anonymous landlord who was based overseas in a tax haven.
My local walking tour, as part of the Kensington Against Dirty Money campaign, ends outside Roman Abramovich’s frozen mansion, which he purchased for £120 million, on Kensington Palace Gardens. In the past week or so, Abramovich has again been in the news, this time for allegations that he owes approximately £1 billion in UK taxes. At the heart of this story are, again, the UK overseas territories. Abramovich and his advisers used a complex web of corporate structures, via Cyprus and the BVI, to use money from the sale of Sibneft back to the Russian Government at huge profit in 2005. They set up approximately 200 hedge funds and maintained that the operations were happening in the BVI, but it has now been uncovered that the real activity was continuing in London—indeed, in Stamford Bridge itself.
This is potentially the biggest tax case since Bernie Ecclestone, and it is vital that His Majesty’s Revenue and Customs has the resources it needs to investigate. Enforcement of the rules and regulations is critical to recovering as much money as possible for the Exchequer and supporting the Minister’s efforts to improve the public finances. It is also time to upgrade our anti-money laundering supervision regime for professional bodies such as accountancy and legal firms, so that dirty money does not flow through the City. The previous Government opened a consultation, but it has not been responded to.
This is urgent, because Abramovich’s is not an isolated case. For years, the BVI has been the global destination of choice for those seeking maximum secrecy for their money. It featured prominently in the Panama papers, in which half of the exposed entities were linked to the BVI. That is why Parliament has clearly stated its will that public registries of beneficial ownership should be implemented across the overseas territories and Crown dependencies.
At the first Joint Ministerial Council of this new Government, in November last year, the BVI, alongside other overseas territories, promised reforms to ensure maximum transparency, and the Government reiterated their commitment to full public access in due course. I absolutely support the Government in this mission, which is why it was so deeply disappointing to see the BVI’s proposals around company registries, which were published last month. Access would be severely restricted. One provision would even allow company owners to be notified not only that someone is attempting to uncover their identity, but of who is making the request and why, putting investigative journalists and anti-corruption activists at risk of legal or physical intimidation. Worse still, that warning system could tip off criminals and give them a head start, allowing them to move illicit assets before enforcement agencies can act. Such measures do not protect business or privacy; they protect kleptocrats and criminals.
We know it can be done: Gibraltar has shown us what can be achieved. It introduced a public register that is similar to the one that the UK has had for several years. If Gibraltar can do it and we can do it, so can the BVI, the Cayman Islands, Bermuda and all the overseas territories. We must not let our Crown dependencies off the hook, either.
Many overseas territories have cited the privacy concerns outlined in the European Court of Justice rulings, but I encourage them all to review the sixth anti-money laundering directive, which would ensure that journalists, civil society, law enforcement and businesses with anti-money laundering duties all have access to the register anonymously and in full. I continue to believe that public registers are the best solution for the overseas territories and Crown dependencies, but minimum progress would be to meet that European regulatory standard.
It is clear from all the evidence—I expect we will hear much more today—that we need to do far more collectively to support the overseas territories to make progress on economic crime. The path forward is challenging, but I know the Government are seized of its importance. The overseas territories must meet the June deadline to make progress towards public registers. There must be no further delays. Trust-owned property should be included in the register of overseas entities. AML supervision should be strengthened to halt the enablers of dirty money. HMRC, the National Crime Agency and other enforcement agencies must proactively make cases and have the skills and resources they need.
To galvanise our international partners, the Foreign Secretary’s proposal for a summit of financial centres here in London would create a focal point for aligning rules and policies. I hope this debate will galvanise support across the House for the vital mission of tackling corruption and economic crime.
Karl Turner (in the Chair)
I remind Members that they should bob if they wish to take part in the debate.
Jim Shannon (Strangford) (DUP)
It is a real pleasure to serve under your chairship, Mr Turner. This is the third time for me this afternoon, but the first time for you—we wish you well in the job you have been elevated to. I thank the hon. Member for Kensington and Bayswater (Joe Powell) for highting the concerns. I say well done on his speech and introduction to the subject matter; we do not hear enough about it in this House, but today gives us an opportunity.
I have been incredibly interested in the hon. Member’s goal to rid the UK of so-called dirty money. In Northern Ireland we have had more than our share of that, of course, through the paramilitary organisations—on both sides of the community, by the way. I remember a case that “Panorama” covered. Dirty money went from Estonia and Poland to the UK and then to Northern Ireland. That money flowed in either direction.
There is estimated to be at least £1.5 billion of UK property owned by Russians accused of financial crime or with links to the Kremlin. Along with others in this House—I can think of someone not too far away—I have already been sanctioned by the Russians. It is almost a badge of honour. I can be free with my words; I am not worried what they say about me. I think we should seize their properties, sell them and use the money to fund the needy in our palliative care units, or to build special education units throughout the UK—anything other than allow our nation to be used in such despicable ways.
I will come back to the point of the debate, which is the need to ensure that overseas tax havens are not providing more scope for tax evasion, or worse, for scurrilous, illegal behaviour. Sometimes it frustrates me, Mr Turner—I suspect it frustrates you every bit as much —when HMRC pursues someone for a slight overpayment or underpayment of tax, yet we have guys sucking away hundreds of millions of pounds and not a word about it.
Just last week I had a constituent in my office with his HMRC tax bill. He owed just over £500 in tax, and part of the reason was that he had not reckoned on the fact that the savings that he and his wife put aside for their pension, as they do not have private pensions, are being taxed. He said to me, “How do I get my hands on one of those foreign tax havens? The Government are taxing the money that I have saved for my future after they have taxed it before it goes into the bank account.” We all smiled—I know he does not mean it because I know him well—but the fact is that there are those who can use accounts in overseas territories to avoid taxes while hard-working middle-class families must pay twice on their income.
Members can understand my frustration on behalf of my constituents whenever they are getting squeezed by HMRC. It is not that we are against paying tax—we pay the tax; that is the way it is—but that we see others blatantly abusing the system. Unfortunately, our British overseas territories have become tax havens to which the money is siphoned off to avoid tax. There is something wrong with that scenario.
I realise that other hon. Members want to speak, so I will finish with this point: it is despicable that overseas territories act as jurisdictions of secrecy because they do not have strong financial reporting rules. I very much look forward to what the Minister will say: he is a good Minister with an understanding of the issues and of these broken questions that I ask him. Others will ask them much more expertly than I can; I just want clarity and transparency, and I want to see those who do wrong held accountable. As a Christian, I know that those who do wrong in this world will be accountable in the next world to God himself, but there is something wrong in this world if they are not accountable under the systems that we have laid down.
People do not have to declare where their money comes from. That has to change, not only for the sake of our constituents, but to ensure justice for all. To those who use the overseas territories to avoid the taxes they should pay, I say, “Your time has come.” I want to see what the Minister can do about that. How many times will working families be taxed while others with more money pay less because of loopholes?
I very much support the hon. Member for Kensington and Bayswater in his fight, and I look forward to hearing from the Minister. I also look forward to hearing from the shadow Minister, the hon. Member for Wyre Forest (Mark Garnier). He is a man of integrity, and he is always there to uphold the issues that we bring forward.
Rachel Blake (Cities of London and Westminster) (Lab/Co-op)
I thank my hon. Friend the Member for Kensington and Bayswater (Joe Powell) for securing this debate. I have joked in previous debates that I could be known as the Member of Parliament for frozen assets; nothing could be truer today, as that is the topic at hand.
At least £5.9 billion in suspect funds has entered the UK property market via shell companies registered in the overseas territories. Over half of that money can be found in my constituency of Cities of London and Westminster. These forces blight our communities, driving out residents and local businesses and replacing them with empty shells of buildings owned by empty shells of companies.
Over the past few months, key pillars of the City and Westminster communities have been at risk of closure, including the Jubilee Hall gym and the Prince Charles cinema. Most notably, the central London YMCA, the oldest YMCA in the world, will close its doors this week. These institutions have always had to compete against the great and the good of London’s residential and business community, but they are increasingly being crowded out. They are bidding in a rental market against shadowy owners with nigh unlimited funds.
Individuals who have frequently made their wealth from corruption and the abuse of power, by skimming money from state procurement contracts or directly acquiring assets, are funnelling the proceeds of this ill-gotten wealth into our property market. They include Alexander Zakharov, the creator of the deadly Lancet drone being used to terrorise the people of Ukraine, whose family own a £1.5 million flat overlooking Big Ben; Daim Zainuddin, a former Malaysian Minister of Finance accused of extraordinary misappropriation of public funds, who owns a £28.6 million office in the City of London; and Mikhail Gutseriev, a major backer of the Belarusian dictator Alexander Lukashenko, whose son Said owns a £160 million portfolio of properties across the Cities of London and Westminster. The immense level of money laundering in London corrodes our communities, damages democracy around the world and blocks the growth prospects of our capital’s economy.
We have already heard why it is so important for the overseas territories, particularly the British Virgin Islands, to implement public registers of beneficial owners. Knowledge about property ownership is a vital tool for protecting our country from kleptocrats. Stonewalling by the authorities in the BVI leaves those who work tirelessly to expose cases of corruption fighting with one hand tied behind their back. Currently, only those in law enforcement can access information about beneficial ownership, and they have to apply for it on a case-by-case basis. The move to fully public registers of beneficial owners is sorely needed and long overdue. Public registers were first meant to be implemented by the end of 2020, which was 1,497 days ago, or 30 Liz Truss premierships.
The BVI has now, finally, suggested an approach, but it is simply not good enough. It will require applicants to identify the beneficial owner when requesting corporate data; essentially, it asks them to know the precise information that they are after. Under the draft policy, applicants could get hold of company ownership information only if they were involved in regulatory or legal proceedings about financial crime or a criminal case in which a court has determined that the data could help to solve the investigation. Most alarmingly, the BVI registrar would be required to tip off beneficial owners within five days of an application being made, allowing beneficial owners to liquidate or move assets.
At this stage, we really need to ask whose side are the BVI authorities on. Do they stand with local communities like mine, with Parliament and with my constituents in the fight against corruption, or do they stand with the kleptocrats who are using the property market as a rainy-day fund? I am pleased to see that this is a priority for our Government and our relations with the overseas territories. This Government are pushing for greater transparency from them. I wholeheartedly support the Government in those efforts. I look forward to further updates and further opportunities to speak about the issue.
Several hon. Members rose—
Karl Turner (in the Chair)
Order. Before I call the next speaker, I will impose an informal time limit of five minutes.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
It is a pleasure to contribute to the debate. I congratulate the three Members who have made speeches so far, particularly the hon. Member for Kensington and Bayswater (Joe Powell); he represents a royal borough and I represent a royal town, but this is an issue on which there is huge cross-party agreement. It has already been set out why that agreement exists. We know that this dirty money comes from the drug trade, from the sex trade and from modern slavery. Alas, credible sources indicate that something like 40% of it comes through London, the overseas territories and the Crown dependencies.
Parliament has already decided what should happen. On 1 May 2018, the House added new clause 6 to the Sanctions and Anti-Money Laundering Bill, under which all overseas territories must implement open registers of beneficial ownership by the end of 2020. As the hon. Member for Cities of London and Westminster (Rachel Blake) said, it was meant to be 2019, but because of the hurricanes, Lady Hodge and I agreed when tabling the amendment that it would not be necessary to do it until the end of 2020.
Subsequently, the Foreign Office arbitrarily extended that figure by three years to 2023. On 4 March 2019, in a succession of points of order to the then Speaker, two former Chairs of the Public Accounts Committee—my now noble Friend Lady Hodge and my right hon. Friend the Member for Goole and Pocklington (David Davis) —and two former Secretaries of State for International Development, namely the right hon. Member for Leeds South (Hilary Benn) and myself, made it clear that that had been done by sleight of hand and that the open registers had to be implemented as soon as possible.
Outrageously, we now find that the will of Parliament has been flouted. The letter from the BVI, which I think was received last week, amounts in my view to a contempt of Parliament. The remedy lies with an Order in Council. The Order in Council, which was published on 14 December 2020, insists that the overseas territories must comply with the requirements of section 51 of the Sanctions and Anti-Money Laundering Act 2018.
The position is very clear. Unless at this summit the overseas territories—we are talking particularly about Cayman and the BVI—say that they will follow the will of Parliament, which is clearly set out in that section of the 2018 Act, the Government must impose an Order in Council in the way that has been agreed. Let us be clear: the Government set out in 2012 the constitutional position on using an Order in Council. None of us wants to do it, but that is what Parliament is now pushed to do. The Government said:
“As a matter of constitutional law, the UK Parliament has unlimited power to legislate for the Territories.”
The overseas territories themselves recognise that they gain hugely from their relationship with the United Kingdom. If they want to travel under our flag—if they want to have the privilege under our monarch—they must accept our values as well. This has gone on far too long. I read that they were suggesting the Foreign Secretary was working to impose these orders in a colonialist way. I cannot think of any other Member of Parliament of whom that is less likely to be true than the current Foreign Secretary.
The brilliant officials in the Foreign Office, who are second to no one in my admiration, have been too willing to keep the peace between the overseas territories and London. They must now ensure that the open registers of beneficial ownership are implemented forthwith, in accordance with the will of Parliament. I very much hope that that will be the result of the summit to which the hon. Member for Kensington and Bayswater referred.
Phil Brickell (Bolton West) (Lab)
It is a pleasure to serve under your chairship, Mr Turner. I congratulate my hon. Friend the Member for Kensington and Bayswater (Joe Powell) on securing this crucial debate on tax transparency in the overseas territories, which goes to the heart of three issues that I will cover.
First, there is the matter of tax justice. Reporting from the Bureau of Investigative Journalism only last week found that sanctioned Russian oligarch Roman Abramovich dodged up to £1 billion of UK tax by structuring the ownership of his fleet of yachts and his hedge fund through the British overseas territories. I will bring this to life with the example of Mr Abramovich’s mega-yacht Eclipse.
According to corporate records, Eclipse was owned directly by Kane Global Holdings Ltd, which was incorporated in the British Virgin Islands. Kane was, in turn, owned by Lindeza Worldwide Ltd, incorporated in the BVI. Lindeza was owned by Electus Investments Ltd, held on trust in Cyprus and the BVI. Above Electus sat the Sara Trust, registered in Cyprus. Finally, there was the ultimate beneficial owner: Mr Roman Abramovich.
Let us be clear. This is a complex web of deceit intended to prevent taxes from being paid where they are due. It is conducted on an industrial scale and involves an army of immoral corporate service providers, lawyers and accountants who are only too happy to facilitate such demands. But this is not just about Mr Abramovich. Indeed, journalists in the Organised Crime and Corruption Reporting Project have reported on dozens of cases involving suspicious transactions linked to high-profile businesspeople from Bulgaria, Georgia and further afield, all systematically channelling money and assets into these jurisdictions to escape their tax liabilities in the UK and elsewhere.
It is simply unacceptable—indeed, it is morally indefensible—that we find ourselves in a situation in which a number of British overseas territories continue to incorporate entities hiding behind the corporate veil of secrecy. All the while, our constituents pay their taxes in good order.
Secondly, there is a corrosive impact on the social contract between British citizens and the state. If it matters so much to the UK Government that UK taxpayers front up to fund our public services, why does it not matter that the mega-rich are exploiting the overseas territories? How can we look our constituents in the eye and say in good faith, “We are pursuing every avenue to pump much-needed resources into our NHS, our police service and our schools,” when the mega-rich and multinational corporations can escape their taxes by squirrelling their money away in British territories offshore?
Thirdly, at a time when the Government are focused on driving economic growth and unleashing the full potential of the private sector, we find ourselves in the bizarre situation that continued secrecy in the overseas territories places an immense regulatory burden on UK firms. As a former financial crime compliance officer in two UK banks, I know only too well the huge investment put into armies of due diligence professionals, who, unable to ascertain the ultimate beneficial ownership of entities incorporated in the overseas territories, spend an inordinate amount of time chasing their tails. That has a simple economic cost for UK businesses and consumers, and the British economy. That burden stands firmly at odds with the Government’s drive to deregulate and to drive up competitiveness.
We have a moral obligation, a societal imperative and an economic impetus to act. That is why we must have publicly accessible registers of beneficial ownership in the British overseas territories. That certain overseas territories continue to hide, obfuscate and deny, and prevent long-overdue reform, is a stain on our collective conscience.
The Minister of State, Foreign, Commonwealth and Development Office, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), confirmed in response to a written question of mine:
“We consider publicly accessible registers of beneficial ownership (PARBOs) a vital tool for combatting financial secrecy.”
He went on to say:
“I have been clear to OT leaders that full PARBOs are our ultimate expectation.”
The Minister for Security confirmed in response to another written question I submitted that the UK Government
“expects implementing legitimate interest access is an interim step to publicly accessible beneficial ownership registers”.
I sincerely hope that the Exchequer Secretary can provide similar assurances today that His Majesty’s Government are committed to working across Government to drive transparency in tax matters, and that it remains the case that they expect publicly accessible beneficial ownership registers to be implemented in the overseas territories.
Time is of the essence. We cannot allow secrecy to be used as a barrier to tax justice. That much I owe to my Bolton West constituents and we, as parliamentarians, owe to this country at large.
Several hon. Members rose—
Karl Turner (in the Chair)
Order. With a time limit of four minutes, I call Bobby Dean.
Bobby Dean (Carshalton and Wallington) (LD)
It is a pleasure to serve under your chairmanship, Mr Turner. I join others in thanking the hon. Member for Kensington and Bayswater (Joe Powell). He has been a relentless campaigner on this issue for a number of years, and I hope that now he is in this place he can make a real impact on it.
I want to make a few short points. The first, which was mentioned by the hon. Member for Strangford (Jim Shannon), is about fairness, and the injustice that many of our constituents feel about this issue. Those who are most able to pay are also most able to avoid paying. The hon. Member spoke about his constituent being chased by HMRC, yet on a global scale it feels like that is not being done in the same way. The sense of injustice really burns people up. This is about restoring trust in politics and our economic system more broadly. The hon. Member for Kensington and Bayswater talked about how global corruption gets to hide under this, too. That underlines the unfairness of this issue.
My second point is about revenue. It is clear that our public services are under strain, and we should be able to assess what tax is owed and collect it. That is a very basic principle. I know that the Government have done some good work in terms of investing in HMRC. I welcome that and hope that it can be a model for what we do on a global scale, so that we go further and faster on this issue, too.
My final point, and the one I wanted to make the most, is about Britain’s responsibility on this global issue. It is a global problem, but it is one in which Britain has a really important role to play. We have probably all seen the statistic that one third of all global tax dodging is enabled by British overseas territories. I share the frustrations of the right hon. Member for Sutton Coldfield (Mr Mitchell) about British overseas territories not necessarily abiding by their constitutional demands or sharing the values we have been talking about today. It is incumbent on us to make sure that our Government act in the fullest and strongest possible way.
I hope the Minister will pledge that Britain will show leadership on this issue, that the Government will ensure that the deadlines are met quickly, and that trusts will be added to the register. I will add that Britain has shied away from participating in discussions on the UN tax convention. One way that we can play a leadership role on this issue is by choosing to be an active participant in that conversation and showing our leadership there too.
In conclusion, this is the right thing to do, it is in our interests to do it, and it is on Britain in particular to lead on it.
Tom Hayes (Bournemouth East) (Lab)
It is a pleasure to serve under your chairmanship, Mr Turner. I commend my hon. Friend the Member for Kensington and Bayswater (Joe Powell) for bringing forward this excellent debate.
Extreme inequality is out of control around our world. Oxfam says that the global wealth of almost 5 billion people—the poorest 60%—has fallen; meanwhile, the world’s richest men have more than doubled their fortunes since 2022. It says that global poverty will not be eradicated for another 230 years; meanwhile, the world could have its first trillionaire within a decade. Here in our country, just like overseas, millions are suffering daily hardship. This is personal for me. I grew up in poverty, with parents who I cared for unable to get a foot in the door of public services starved of resources. That is why I stood to be a Labour MP who campaigns against tax secrecy.
A contributor to the widening inequality crisis is a rigged, secretive global tax system. Let us be clear: tax abuse and corruption go hand in hand. Leaked confidential documents dating back over a decade reveal a global spider’s web of secretive offshore tax havens. The super-rich and multinational corporations evade scrutiny and avoid paying their fair share of tax. In the words of the previous World Bank president, corporate tax dodging is
“a form of corruption that hurts the poor”.
Poor countries and poor people in our society need us to raise our voices to end the era of tax havens. This Government can do something about it. Ministers have set out our transparency expectations to the overseas territories. In his reply to the written question I tabled in October about our recent steps to ensure that OTs establish public registers, the Minister of State, Foreign, Commonwealth and Development Office, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), noted that he had written to OT Governments to
“set out UK transparency expectations”,
and say that
“full public accessibility remains our expectation.”
He also said:
“Access filtered to those with ‘legitimate interest’ should be delivered to a clear timetable, as an interim step”
and he outlined to the OTs
“a set of minimum requirements that UK Government would expect to see in any ‘legitimate interest’ regime.”
The Government are resetting our relationship with the overseas territories and seeking a partnership based on transparency and accountability—but, as we heard, it takes two to dance. Regrettably, OTs such as the British Virgin Islands are doing all they can to fall short and continuing to facilitate illicit finance and kleptocracy, as we heard from the right hon. Member for Sutton Coldfield (Mr Mitchell). It is a scandal. The public want solutions, and that is why we MPs are calling for action.
While the rich get richer and the rest fall back, public services collapse and public spaces rot. Populists do not create grievances, but they do not half exploit them. There are plenty of grievances to exploit in our country because of the toxic cocktail of inequality and austerity, which has been worsened by tax secrecy and tax avoidance. Our determination as a Government to be on the side of working people will require decisive action towards tax secrecy and tax avoidance. We can secure tax justice, and when we do, we will help the hungry to be fed and help families to know that politics is once again on their side.
I commend the fact that the Foreign Secretary will hold a global summit, but I would call it an anti-corruption summit, to follow the one that happened 10 years ago. I believe that is what we need.
James MacCleary (Lewes) (LD)
I congratulate the hon. Member for Kensington and Bayswater (Joe Powell) on securing this timely discussion; it is a pleasure to take part in it.
New research from the Tax Justice Network reveals something that should shame us all: the world’s three biggest corporate tax havens—the British Virgin Islands, the Cayman Islands and Bermuda—are all British overseas territories. Those havens cost the world an estimated $84 billion in lost corporate tax revenue every year. That is money that could be spent on hospitals, schools and infrastructure.
What is more, thanks to financial secrecy, we still do not know the full scale of the problem. The UK Government cannot shrug off responsibility. British overseas territories are subject to UK law in key areas, as has been outlined by others, and in 2018 Parliament passed legislation requiring them to implement public registers of company ownership—a crucial step in tackling financial crime. However, successive Governments have failed to enforce that. This new Government must finally act and ensure that overseas territories meet the same transparency standards as the UK.
We must go further. Labour should back global efforts such as the UN tax convention to crack down on tax avoidance. We need a fairer tax system that works for everyone, not just the super-rich. That means reversing Conservative tax cuts for big banks, raising the digital services tax on tech giants and closing capital gains loopholes exploited by the wealthiest. A 4% tax on FTSE 100 share buy-backs would also encourage real investment in jobs and growth.
The British Virgin Islands case is a warning. Just last month, a jury in Florida convicted the former BVI Premier of drug trafficking and money laundering while in office. If the public register of company ownership had been in place as promised, that corruption would have been far harder to conceal. The Government assured Parliament that all overseas territories would have those registers by the end of last year. Where are they? Do the Government recognise their responsibility to tackle financial crime?
Then there is the issue of Russian assets. Transparency International UK has identified over £830 million-worth of UK-linked property belonging to individuals close to Putin and/or accused of corruption. While £7 billion in Russian assets has been frozen in the overseas territories, we must ask: what is being done to prevent Russian oligarchs from hiding their money there, and when will we start seizing those funds and using them for Ukraine’s reconstruction?
For too long, Britain has been the laundromat for dirty money. Under both Labour and Conservative Governments, our country has allowed autocrats and oligarchs to buy up property, infrastructure and influence. We have seen vital assets sold off to companies with links to the Chinese Communist party. That has made some people in Britain very rich, but it has come at a huge cost to our security, our economy and our sovereignty. The Liberal Democrats will put an end to that. We will close the loopholes in economic crime legislation, strengthen the register of beneficial ownership and give agencies such as the National Crime Agency and the Serious Fraud Office the resources they need to go after economic criminals.
The scale of tax avoidance is staggering. The OECD estimates that global profit shifting costs between $100 billion and $240 billion a year. The Tax Justice Network puts the figure even higher, at $348 billion annually. Where does 23% of that profit shifting happen? Through the UK, its Crown dependencies and the overseas territories: the so-called network of British tax havens.
The UK must be a leader in international tax reform. The Liberal Democrats have long called for an end to non-dom status, and we remain committed to the UN sustainable development goals. It is time that we worked with our international partners to clamp down on corporate tax avoidance and raise the global minimum corporation tax to 21%. Fair taxation is not just about economics; it is about justice. Let us ensure that everyone from the biggest corporation to the wealthiest elite pays their fair share.
Mark Garnier (Wyre Forest) (Con)
It is a great pleasure to serve under your leadership, Mr Turner, as it is to respond to the debate called for by the hon. Member for Kensington and Bayswater (Joe Powell). This will be one of those debates where there is ferocious agreement in all parts of the House. Before I get into the substance of my speech, it is worth mentioning that there is a legitimate role for tax havens. The City of London will certainly have investment funds located in tax havens in order to have tax neutrality for investors into those funds. Those investors have to pay their domestic tax, but they do not want to pay tax on the funds as they go forward.
It is also worth mentioning that, in some cases, small islands will look to see if they can grow their economies by providing financial services. Again, if they are doing that in a legitimate way, and one that fits with the wishes of the world, there is nothing wrong with that. But that is the important point: it is incredibly important that what they are doing is seen to be legitimate, right and fair for everybody else.
Turning to the substance of the debate, as hon. Members have rightly pointed out, there is still much work to be done on tax transparency. As part of the Sanctions and Anti-Money Laundering Act 2018, overseas territories were required to introduce public registers of beneficial ownership. In 2020, the previous Government set out in a written ministerial statement the expectation that the territories would implement registers by the end of 2023.
Intense discussions took place with overseas territories over the implications of the ruling by the Court of Justice of the European Union that publicly accessible registers were contrary to the EU charter of fundamental rights. Despite some overseas territories’ raising concerns over the ruling, which does not apply to the UK, the previous Government were satisfied with the lawfulness of the public register. I am sure the Minister will confirm that today. However, the impact of the EU ruling has led to delays in the overseas territories implementing the public register. The previous Government made it clear that they expected progress in 2024, yet, as we would all agree, progress remains far too slow.
Too many jurisdictions under our responsibility continue to allow opaque corporate structures that enable illicit finance to flow unchecked. That is particularly concerning in the light of recent geopolitical developments, including the increase in money from sanctioned countries—Russia —being laundered through offshore entities. I am looking forward to the Exchequer Secretary updating us on what progress has followed the November joint ministerial council for overseas territories. The Opposition welcome the communiqué, which reaffirmed the Government’s expectation that overseas territories should provide public access to beneficial ownership registers. It is right to commend Gibraltar and Montserrat, which have implemented public registers, and the Falkland Islands and St Helena, which have pledged to do so by April 2025. It is worth adding that, while not directly legislated for by the UK, the Crown dependencies—Jersey, Guernsey and the Isle of Man—have made commitments to greater transparency, too.
Mark Garnier
I hope my right hon. Friend will not mind if I do not, because I am conscious that we have very little time.
It remains a concern that major financial centres such as the British Virgin Islands, Bermuda and the Cayman Islands remain resistant to these measures. Will the Exchequer Secretary provide an update on what pressure the UK Government are placing on those overseas territories that are not fully complying with the Sanctions and Anti-Money Laundering Act 2018?
The UK Parliament has sovereign powers over the overseas territories. Therefore, we cannot allow any jurisdiction to water down these proposals. The previous Government allowed for an interim step of a legitimate interest model, which would allow access to beneficial ownership information by members of the public with a legitimate interest in accessing it, including media and civil society organisations involved in the fight against illicit finance and money laundering. Even if that might be a stepping-stone for some overseas territories, I hope the Minister will confirm that it should not dilute efforts to create a public register.
Overseas territories must align with the UK’s own standards and comply with UK law. What is the Government’s plan if further delays occur? Will there be consequences for non-compliance? This Government and the previous Government have repeatedly stated that tackling illicit finance is a priority—we agree on that point. The current Foreign Secretary has declared:
“The golden age of money laundering is over”.
I am sure the Minister would agree that our overseas territories and Crown dependencies must not become the weak link in the fight against money laundering and corruption.
Karl Turner (in the Chair)
Before I call the Minister, I remind hon. Members that the Member in charge normally has two minutes at the end to wind up. I would be grateful if the Minister bore that in mind.
The Exchequer Secretary to the Treasury (James Murray)
Thank you for that reminder about the timing, Mr Turner. I congratulate my hon. Friend the Member for Kensington and Bayswater (Joe Powell) on securing this debate, and Members on all sides of the House on their contributions, including the hon. Member for frozen asset—as she styled herself in her contribution—my hon. Friend the Member for Cities of London and Westminster (Rachel Blake).
I know Members have questions that they have raised about the implementation of specific tax transparency measures in the overseas territories, and our continuing collaboration with them. I will turn to those in a moment, but I will briefly set out the broader constitutional context of the overseas territories and their role in international tax.
We continue to support the overseas territories to build vibrant and sustainable economies, including through encouraging greater links to the UK economy. The overseas territories are an integral part of the British family. The inhabited overseas territories are self-governing jurisdictions with democratically elected Governments and responsibility for fiscal matters. They have responsibility for setting their own policies, including determining their own tax rates in line with international standards. They are also committed to upholding international tax standards, and the UK Government are actively working with them to ensure they meet their commitments.
Domestically, the UK has implemented a range of policies to prevent shifting of profits to low-tax jurisdictions, including controlled foreign corporation rules, anti-hybrid rules, and corporate interest restriction rules. All overseas territories with an international financial centre have joined the UK in becoming members of the OECD/G20 inclusive framework on base erosion and profit shifting. That signals their ongoing commitment to implementing the BEPS minimum standards.
All overseas territories with financial centres have also committed to the global forum’s exchange of information and request standard, and to implementing the OECD’s common reporting standard and cryptoasset reporting framework for the automatic exchange of information for tax purposes. Treasury officials regularly engage with counterparts in Crown dependencies and overseas territories to exchange best practice and technical expertise in adhering to international tax standards.
Where overseas territories need more in-depth support, HMRC works with them to build capacity and to comply with international standards. Support from HMRC has in recent years helped Montserrat and Turks and Caicos to be found fully compliant with the EU’s code of conduct group.
Of course, as other hon. Members have mentioned, the Government are also determined to close the tax gap in the UK public finances, and tackling offshore tax non-compliance is a key part of that. HMRC can access relevant information from overseas territories through the automatic exchange of information, and exchange on request, for tax investigations.
At the autumn Budget, the Government announced a record package to close the tax gap. That included our commitment to growing HMRC’s compliance workforce by 5,000 people over the next five years. As part of that, we are expanding HMRC’s international compliance work, supported by a campaign of targeted external recruitment of senior tax experts. Before the end of this financial year, HMRC expects to have recruited more than 50 experienced international tax professionals through that exercise, which will more than double the number achieved in the previous year. Tackling illicit finance in the UK and its overseas territories and Crown dependencies is a priority for the Government.
Mr Mitchell
Can the Minister provide an undertaking that if the overseas territories, and indeed the Crown dependencies, do not co-operate with what Parliament has set out—the Order in Council published in draft already—the Government will exercise their rights on behalf of Parliament and issue this Order in Council?
James Murray
I had a feeling the right hon. Gentleman was going to ask a question along those lines. I will answer it in a moment.
I welcome the commitment made by the leaders of the overseas territories in November 2024, which has been referred to by hon. Members, to support the Foreign Secretary’s campaign against illicit finance. As part of that commitment, boosting corporate transparency through registers of beneficial ownership is a core aim in helping to tackle money laundering and tax and sanctions evasion and in helping to foster an open and trusted business environment. Fully public registers of beneficial ownership are already in place in the UK, Gibraltar and Montserrat.
My hon. Friend the Member for Kensington and Bayswater asked about the register of overseas entities and whether trust-owned property would be included on those registers. If an entity from an overseas territory owns property in the UK, they would fall under the requirements and would need to declare their beneficial owners. That includes beneficial owners associated with a trust. The register of overseas entities is also being updated this year to grant, on application, access to trust information that is currently restricted from the public.
At the joint ministerial council in November 2024, the Government confirmed their expectation that fully public registers of beneficial ownership would be implemented by overseas territories. The Falkland Islands and St Helena committed to implement those by April 2025. Bermuda, the British Virgin Islands, the Cayman Islands, Anguilla and the Turks and Caicos Islands committed to implement registers of beneficial ownership accessible to those with a legitimate interest by June 2025 at the latest. This approach offers the maximum possible degree of access and transparency while retaining the necessary safeguards to protect the right to privacy in line with respective constitutions.
Progress towards delivering on these commitments is under way. The UK Government have been clear to the elected leaders of the overseas territories that we expect registers to be delivered by the deadline and in line with the standard agreed at the joint ministerial council. UK Government officials continue to work in partnership with officials in the overseas territories to support the implementation of these registers, and last month they wrote with further clarifications on the minimum requirements for registers of beneficial ownership. The Government are continually reviewing this issue and will consider carefully what steps to take if registers are not delivered on time and to an acceptable standard. We are aware of the consultation document released by the British Virgin Islands and continue to engage with BVI to improve its proposal, in line with the agreement made at the joint ministerial council.
The UK, the Crown dependencies and the overseas territories stand united in condemning the Russian Government’s aggression. We have been working in lockstep to enforce UK sanctions, which hon. Members have mentioned, including by freezing assets across the Crown dependencies and overseas territories. That has helped to implement the UK Government’s sanctions regime, which, to date, has amounted to $9 billion-worth of assets. To support this, the Office of Financial Sanctions Implementation has provided significant technical assistance to build capacity in the Crown dependencies and overseas territories.
As we have heard in this debate, the push for tax transparency in the overseas territories generates strong views. I recognise that there have been instances in which high net worth individuals and multinational entities have sought to hide their assets and profits in the overseas territories. The overseas territories are working to implement international tax transparency standards and work closely with us to identify tax abuse, to combat money laundering and terrorist financing, and to enforce UK financial sanctions. We must continue to work towards greater tax transparency in the UK, the overseas territories and globally. That includes greater transparency regarding company ownership, as well as the ownership of assets such as cryptoassets and real estate, to ensure the public can see who the beneficial owners are. I thank you again, Mr Turner, I thank all hon. Members who have spoken in the debate and I thank my hon. Friend the Member for Kensington and Bayswater in particular for securing this debate.
Joe Powell
I thank the Exchequer Secretary to the Treasury for his response, and I thank all hon. Members who have spoken for their contributions. This has been a productive and constructive debate. There has been a lot of agreement on the problem. We heard the tax case very strongly, particularly from the hon. Members for Strangford (Jim Shannon) and Carshalton and Wallington (Bobby Dean). We heard the housing and communities case, particularly from my hon. Friend the Member for Cities of London and Westminster (Rachel Blake). We heard the economic growth case from my hon. Friend the Member for Bolton West (Phil Brickell), the poverty and inequality case from my hon. Friend the Member for Bournemouth East (Tom Hayes) and the constitutional case from the right hon. Member for Sutton Coldfield (Mr Mitchell), which took us through the history over the past decade of missed deadlines and opportunities for the action we are talking about to be taken.
I hesitate to say that this will be the last debate in this place on this topic—I suspect it will not be—but I welcome the Exchequer Secretary’s commitment. I think he was being quite polite when he said that the Government wished to see an improvement to the BVI’s proposal. The BVI needs to go back to the drawing board and bring back a proposal fully in line with the principles that Parliament concluded were the best action for this problem, which is full public registries of beneficial ownership.
In final closing, I thank the spokespersons for the Liberal Democrats and the Conservatives, the hon. Members for Lewes (James MacCleary) and for Wyre Forest (Mark Garnier), respectively, for their constructive contributions. I agree that there may be some legitimate uses of offshore tax centres, in particular for companies in multiple jurisdictions, but the heart of the problem is that the BVI, the Caymans, Bermuda and others are still far too susceptible to very serious illicit crime.
If there is one message that I would like all hon. Members to take home it is that this is not an abstract problem. It is not something just to do with billions and trillions in the financial system. It is about constituents who are being chased by HMRC who feel the double standards; it is about our housing crisis and empty properties; it is about our sanctions, their enforcement, and support for autocrats such as Putin, and it is about our public finances.
We have a strong case for why we need to act, and I reiterate my thanks to the Minister for his outlining of the next steps. The June deadline to see progress from the overseas territories is imminent, but as the right hon. Member for Sutton Coldfield said, this area is littered with missed deadlines. We need a proper deterrent from the British Government to say what will happen if the territories pass those deadlines and no action has been taken.
Mr Mitchell
We have another three minutes, so I am keen to help out.
To be clear, we are talking here about dirty money and the source of this money—money stolen from Africa and from Africans. The baddies have all the best tunes, and they have the money to get their way, so the forces of law and order are always fighting to catch up. It is important to emphasise the open registers. The mist fell from all our eyes when, thanks to the BBC and The Guardian newspaper, the Paradise and Panama papers were published. They showed that, without this open register approach, we cannot join up the dots to see what those clever villains are doing, catch them, trap the money and hopefully return it. The hon. Gentleman and I agree completely, but I hope that we can carry the Government with us.
Joe Powell
I thank my co-chair of the all-party parliamentary group on anti-corruption and responsible tax, where we talk about this a lot.
Exhibit A is the UK public register of company ownership—when introduced, we were told that there would be all sorts of capital flight and that people would not come here to buy properties and invest, but that has simply not been the case. The register has now been in existence for several years. In fact, many of the countries that were the source of corruption and dirty money are now implementing public registries: Nigeria, Indonesia and Kenya, to name but a few.
We know action is possible—Gibraltar and others among the overseas territories have already done it—and it is now incumbent on the others to follow suit. I implore the Government to keep the pressure on so that we do not have to come back too many more times to debates such as this to re-analyse the same problem that we all agree is there, when we know the policy solution is within our grasp.
Question put and agreed to.
Resolved,
That this House has considered tax transparency in the Overseas Territories.