Combatting Offshore Tax Evasion After Brexit EmilDuvessa SondajBandeen, Han Juliette Bowen, Mark O’Brien, Will Melling and Zeki Dolen Emil Sondaj Hansen,
EXECUTIVE SUMMARY Purpose of the Paper Since the financial crisis of 2007-08, governments around the world have made unprecedented efforts to tackle offshore tax evasion and avoidance. After Brexit, Britain is in a unique position to articulate a new strategy on these matters, since it is no longer bound by the requirements of unanimity of the European Union. The focus of our paper is on offshore tax evasion and avoidance, predominantly conducted by wealthy individuals and multinational companies, as opposed to tax mitigation that is either primarily domestic or within both the spirit and letter of UK tax law. Historical Context It is crucial to situate any approaches to combating tax evasion within British historical relations to tax havens, in order to make appropriate contemporary recommendations. British officials, both in the Overseas Territories and in the Foreign and Commonwealth Office, actively encouraged the administrations of these islands to enact tax haven legislation – cutting corporation tax rates and increasing corporate secrecy provisions – as an alternative development strategy. What Does Britain Leave Behind? The EU's two major interventions on tax havens - the EU Savings Directive and tax haven blacklist - have had relatively limited effects on tax evasion and avoidance to date. The fact that European law obliges taxation decisions to be unanimous in the Council of Ministers has impaired the EU's ability to take stronger action against tax evasion and avoidance. The UK's overseas territories and the UK itself are likely to face greater EU pressure after Brexit.
Unilateral efforts: Analysis of the US Foreign Tax Compliance Act While the American FATCA has had some success in curbing tax evasion by US companies and individuals, the costs of compliance for foreign countries and businesses are considerable. While these parties have strong incentives to comply for access to US income sources, the
The Wilberforce Society Cambridge, UK
www.thewilberforcesociety.co.uk
2
February 2021
