The Nations Who are Enabling Corporate Tax Dodging


by Anna Fleck, 
Oct 1, 2024

New analysis by the Tax Justice Network has revealed the United Kingdom to be the biggest enabler of corporate tax dodging in the world. As this infographic shows, British Overseas Territories and Crown Dependencies dominate the top eight roundup of places allowing multinationals to avoid paying tax on their profits. In total, this makes the UK responsible for about one third of global tax avoidance risk.

Ireland entered the top ten list for the first time in 2024 with an index value of 1,622, ranking in ninth place. It is followed by Luxembourg (1,480) and then the Bahamas, the latter of which is an independent member of the British commonwealth but not an OT or CD. In position 12 comes the Isle of Man and in 13 comes Guernsey, both Crown Dependencies. The United Kingdom places in 18th position with a value of 894. According to the Tax Justice Network, about half a trillion dollars are lost to tax havens per year.

The index evaluates jurisdiction laws and monitors the volume of corporate financial activity entering and leaving jurisdictions. A Haven Score is determined by more than 70 questions under 18 indicators to find the extent to which a jurisdiction’s laws and regulations allow for corporate tax abuse. The outcome of these indicators are then combined with global scale weights, which are based on IMF data on foreign direct investments. The final figure is a measure of the contribution of each jurisdiction to the global problem of corporate tax abuse.


Infographic: The UK Dominates the Most Damaging Tax Havens | Statista You will find more infographics at Statista




Definition and How it is Used.

The double Irish with a Dutch sandwich is a tax avoidance technique employed by certain large corporations, involving the use of a combination of Irish and Dutch subsidiary companies to shift profits to low or no-tax jurisdictions. The technique has made it possible for certain corporations to reduce their overall corporate tax rates dramatically.

The double Irish with a Dutch sandwich is just one of a class of similar international tax avoidance schemes.

These techniques are most prominently used by tech companies because these firms can easily shift large portions of profits to other countries by assigning intellectual property rights to subsidiaries abroad.

Due largely to international pressure and the publicity surrounding the use of double Irish with a Dutch sandwich, the Irish finance minister passed measures to close the loopholes in the 2015 budget. The legislation effectively ends the use of the tax scheme for new tax plans. Companies with established structures were able to benefit from the old system until 2020.

Example of the Double Irish with a Dutch Sandwich

In 2017, Google reportedly transferred 19.9 billion euros or roughly $22 billion through a Dutch company, which was then forwarded to an Irish company in Bermuda. Companies pay no taxes in Bermuda. In short, Google's subsidiary in the Netherlands was used to transfer revenue to the Irish subsidiary in Bermuda.


Global findings

  • British Virgin Islands, Cayman and Bermuda remain the biggest threat to countries’ public purses, while the UK raises its own defences against global corporate tax abuse
  • The UK’s “rules for me, not for thee” attitude is why countries must press on with plans to agree global tax rules democratically at the UN, the Tax Justice Network urges
  • Lax rules on royalties and service charges prove to be the biggest dividing point between countries that improved or worsened their ranking
British tax havens
  • UK network of tax havens responsible for a third of corporate tax abuse risks, but – astonishingly – rated as “not harmful” by the OECD
  • New UK government urged to break with previous attempts to “kill” the UN tax convention and to make good on its commitment to honesty
EU

  • EU countries also responsible for a third of corporate tax abuse risks, but finally drop opposition to UN tax convention
  • Improvements on royalties and service charges marred by major loopholes exposed in the EU’s Anti-Tax Avoidance Directive
  • Ireland enters top 10 for the first time as it seeks to shed tax haven image
Other
  • African countries are responsible for 4% of corporate tax abuse risks; Latin American countries for 3%


The UK’s network of British tax havens remains the biggest threat to countries working to stop multinational corporations from cheating on tax, a global ranking of the most harmful corporate tax havens shows.1 Meanwhile, the UK has strengthened its own defences against global corporate tax abuse, while spending the last two years attempting to “kill” countries’ efforts at the UN to protect themselves from tax havens.

The Tax Justice Network says the UK’s “rules for me, not for thee” attitude documented by the ranking is why countries must press on with plans to agree global tax rules democratically at the UN, and urges the newly-elected UK government to break with the obstructive approach of its predecessor. The UK is now one of only 8 countries opposing the UN process.

Countries at the UN voted in August 2024 to adopt an ambitious scoping document, aka terms of reference, for a UN tax convention, after months of negotiation. 110 countries voted in favor of the terms of reference; only 8 voted against; and 44 countries abstained. Those that voted against were: Australia, Canada, Israel, Japan, New Zealand, South Korea, the UK and the US. The majority of countries that abstained were EU countries.