Tax haven firms cost UK a fortune

THERE would be no need for the tax increases threatened by Tony Blair in the Budget on 17 April if the Prime Minister would make Lakshi Mittal's LNM steel group and other corporates pay taxes like everybody else, it is claimed.

The likes of Sir Richard Branson's Virgin and Bill Gates's Microsoft, along with Elan, Enron, Exxon, General Motors, News Corporation, Northern & Shell and Portland Investment are also named as companies which, quite legally, use offshore havens to 'shave' tax revenues, a practice the UK Government connives in, at the cost of an estimated £85bn a year.

The charges are made by the Association for Accountancy & Business Affairs, a pressure group of off-message accountants, academics and MPs in a new study paper, No Accounting for Tax Havens.

Successive Governments have been reluctant to take action, preferring to appease 'a wealthy elite and global corporations' by shifting the burden on to the British electorate each Budget Day.

The Chancellor is selling the 700 buildings occupied by the Inland Revenue, Customs & Excise and the Valuation Office Agency for an undisclosed sum, thought to be about £2bn, to Mapeley, a consortium involving the international financier George Soros and which is registered in the British Virgin Islands tax haven.

'The Government says if people want a better National Health Service they've got to pay more tax, but that presupposes that all those who should be paying tax are paying tax. Yet many big companies earning substantial revenues in the UK pay little or no tax here,' said co-author Prem Sikka, professor of accounting at Essex University.

'Tax havens are costing all of us money for worse public services,' added Professor Sikka. AABA is promising a further study of alleged censorship in accountancy's professional journals. 'Most of these tax havens are British Crown Territories - Jersey, for example, is only 45 minutes away from London.'

The Government protects Jersey, the study paper alleges, describing an island of 87,000 people that is home to £400bn of 'footloose' capital, and which is effectively run for and by big business. 'Jersey rents out its legislature to big business which writes its own laws,' claim the authors of the study, one of whom, John Christensen, is a former economic adviser to Jersey. The Organisation for Economic Co-operation and Development lists 35 global tax havens but says Jersey and Guernsey are two that are promising to shed more light on their handling of tax and regulation by the end of 2005.

Jersey's legislature is effectively for hire, the study charges, saying Ernst & Young and PricewaterhouseCoopers were able to get the island to enact limited liability partnership legislation to enable the accountancy firms to reduce their liabilities 'to stakeholders injured by poor audits'.

There has never been a General Election on the island, and there is no written record of Parliamentary debates, the report's authors say.