On May 28th the Tax Justice Network (TJN) published its biannual Corporate Tax Haven Index (CTHI), a follow on of its Financial Secrecy Index (FSI), released last year.

The index, the first of its kinds, is calculated through a combination of internal policy metrics and the share of global FDI in those jurisdictions. You can find a full breakdown of their methodology here.

The top ten states contributing the most to corporate tax avoidance follows: 

1. British Virgin Islands (British territory)
2. Bermuda (British territory)
3. Cayman Islands (British territory)
4. Netherlands
5. Switzerland
6. Luxembourg
7. Jersey (British dependency)
8. Singapore
9. Bahamas
10. Hong Kong

The Corporate Tax Haven Index found the United Kingdom (UK) and its satellite network of overseas territories and crown dependencies are by far ‘the world’s greatest enabler’ of corporate tax avoidance. They account for nearly a third of corporate tax avoidance risks globally.

‘Nearly 14 per cent of foreign direct investment reported by the International Monetary Fund – over $6 trillion – is booked in the UK network, where the lowest available corporate tax rates averaged 1.73 per cent,’ TJN communications coordinator Mark Bou Mansour wrote on the network’s blog.

Annexation of Tax Rights

The Corporate Tax Haven Index also revealed an aggressive dispossession of low-income countries’ tax rights spearheaded by wealthier countries. This is done through double tax treaties.

The top ten countries most aggressive in terms of lowering other countries’ withholding tax rates through treaties listed by the TJN are:

1. United Arab Emirates
2. United Kingdom
3. France
4. Switzerland
5. Netherlands
6. Sweden
7. Ireland
8. Spain
9. Cyprus
10. Austria

The TJN noted the UK again was amongst the most aggressive in their use of double tax treaties, while another former colonial empire France is also coming third.

The TJN found that 72% of OCED treaties with lower income states featured those reductions. Moreover, OCED countries were 41% more aggressive in undercutting rates.

The TJN urged governments to use the Corporate Tax Haven Index to evaluate their vulnerabilities to corporate tax avoidance risk, both internal and from other countries, and immediately identify opportunities for minimising their exposure. It also called on governments to implement a unitary tax approach that will ensure full alignment of multinationals’ taxable profits with the location of their real economic activity.

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