City Of London 'Black Hole' Due To Tax Haven Use, Warns Charity

Tax Secrecy 'The Norm, Not The Exception' In The City Of London
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A general view of Canary Wharf business district, London, during Earth Hour.
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There is a "black hole" in the City because leading companies use subsidiaries based in secretive tax havens, a charity has warned.

Christian Aid said blue chip firms in the FTSE 100 had set up nearly 30,000 subsidiaries, with 14% of them based in "highly secretive" jurisdictions.

The charity's report warns that the location of the subsidiaries means it may be impossible for governments to establish if firms are paying the right amount of tax or for investors to establish the true worth of a company.

Christian Aid's research found that FTSE 100 companies have created 29,891 subsidiaries but details of turnover, assets, shareholder funds and number of employees are freely available in relation to only 26% of them.

Information was impossible to obtain, even for payment, in relation to a further 21% - some 6,396 companies.

The report's co-author Katharine Teague said: "We were shocked by how little information is freely available about most companies' subsidiaries.

"What our findings show is that secrecy is not the exception but the norm, even among the largest 100 companies traded on the London Stock Exchange.

"These are household-name firms in which millions of people invest, through their pension funds and savings. But the secrecy is so deep and widespread that it is like a blindfold on everyone who has financial dealings with these companies."

The research, using the Orbis database and the Financial Secrecy Index (FSI), found that FTSE 100 investment and finance firms had 37% of their subsidiaries in locations rated as "highly secretive" on the FSI, banks had 28%, mining companies 19% and real estate 18%.

Almost half (46%) of FTSE 100 mining firms' subsidiaries were in non-transparent jurisdictions for which no data at all was available, along with 40% from oil and gas giants, 30% from insurance firms, 27% from banks and 25% from media companies.

Prime Minister David Cameron made increasing corporate transparency a key part of the G8 agenda at last year's Lough Erne summit in Northern Ireland, but Ms Teague said far more needed to be done.

She said: 'If we want to ensure that the companies playing ever larger roles in our societies are financially stable, socially responsible and well-regulated, then such secrecy must end. Transparency won't guarantee well-behaved firms but it is a necessary condition for it.

"David Cameron declared his intention to 'knock down the walls of company secrecy' when the G8 met in the UK last summer. While the UK has taken some steps since then, our report shows that we are only chipping away at the plaster work. The foundations of secrecy stand firm."

The charity called for the UK and other governments to require all companies to report their accounts on a public country-by-country basis, requiring them to publish data such as profits made and taxes paid separately for each country in which they operate.

The report urged the UK Government to urgently adopt measures to improve the availability of companies' accounts and put pressure on the Overseas Territories and Crown Dependencies to increase transparency.