Tax haven ranking: UK protects itself while keeping world defenceless to British tax havens

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

More highlights

• African countries are responsible for 4% of corporate tax abuse risks; Latin American countries for 3%
• Regional corporate financial activity further concentrates in Mauritius
• Brazil sees biggest score deterioration among Latin American countries, becomes more vulnerable, after switching to weaker OECD standards

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.²

EU countries were found to pose just as big of a threat to the world – tending to rank lower than British tax havens but closing the distance in impact through their numbers. However, in stark contrast to the UK, the EU recently withdrew its opposition to the negotiation of a UN tax convention, clearing the path to the best shot in a century to end global corporate tax abuse.

Findings from the latest ranking update

The latest update to the Corporate Tax Haven Index sees three British tax havens – the British Virgin Islands, Cayman and Bermuda – retain the top three positions on the ranking respectively. British Crown Dependency Jersey ranked 8th again, retaining its position among the top ten.

The Corporate Tax Haven Index ranks countries on how complicit they are in helping multinational corporations underpay corporate income tax in other countries. It does this by evaluating how much wiggle room for corporate tax abuse a country’s laws and regulations provide, and by monitoring how much financial activity conducted by multinational corporations enters and exits the country. This two-factor approach of assessing both laws and activity allows the index to rank countries on the relative risks their laws pose to others in practice and not just in theory, unlike most tax haven “blacklists”.³

It’s not just the size of the loopholes that’s measured by the index, but how often those loopholes might get used.

Lax rules on royalties and service fees proved to be the biggest dividing point between countries that improved and worsened their ranking in the latest update to the index. While countries’ movements on the ranking are determined by several datapoints, countries that improved their rankings, and so moved down on the index, tended to have strengthened their laws to guard against multinational corporations inflating and overcharging royalty payments and service fees to artificially drive down their profits and consequently underpay tax.⁴

Exploiting royalty payments to underpay tax was a key component of the notorious “Double Irish, Dutch Sandwich” tax abuse scheme used in the past by some of the biggest multinational corporations – including Google, Facebook, Coca-Cola and Pfizer – to underpay billions in tax.⁵

Some of the biggest improvements on royalties and service fees rules were seen from Belgium, Denmark, Italy and Portugal.

In contrast, countries that moved up the ranking tended to have weakened their laws against this particular technique of corporate tax abuse. Some of the worst deteriorations were seen from Brazil, Poland and Mexico.

The index also exposed significant loopholes in countries’ rules on controlled foreign companies, particularly in the EU. These rules are meant to make sure that foreign companies in other countries owned and controlled by local companies cannot be used to shift profit abroad and consequently pay less tax.⁶

While many countries scored favourably on the index in the past for introducing such rules, a deeper dive this time round into these rules by the index’s researchers found loopholes that render the rules far less effective than previously believed. Many countries were scored negatively as a result, including 16 EU countries.

Moran Harari, deputy director of policy at the Tax Justice Network, said:

“Every second, we lose a nurse’s yearly salary to a tax haven. The Corporate Tax Haven Index helps identify the corporate tax havens most responsible for this harm, and the laws governments can fix to protect against it. Corporate tax abuse robs governments of public money and robs people of a better future. We urge all governments to use the index to tackle corporate tax abuse at home and abroad.”

Contested global tax rulemaker, defended by UK, rubberstamped British tax havens as “not harmful”

The three British tax havens ranking at the top of the Corporate Tax Haven Index – the British Virgin Islands, Cayman and Bermuda – earned the worst possible scores (100 out of 100) across all 18 indicators used by the index to evaluate countries’ laws.⁷

Yet all three tax havens are currently rated as “not harmful” by the OECD, a small club of rich countries and tax havens that has served as the world’s de facto rulemaker on tax for over 60 years, and which the UK is attempting to obstruct the majority of countries at the UN from superseding with a new UN tax body. The rating is issued under the OECD’s flagship policy for identifying and isolating countries that enable multinational corporations to abuse tax.⁸

The UK and its network of British tax havens – where the UK government has full powers to impose or veto lawmaking, and what is often referred to as the UK’s “second empire” – are responsible for a third (33%) of the corporate tax abuse risks identified by the Corporate Tax Haven Index today. This is an increase from 31% in 2021.

Countries are estimated to lose $84 billion in corporate tax a year due to multinational corporations using the UK and its British tax havens to underpay tax. This yearly loss goes up to $169 billion when including losses arising from wealthy individuals using the UK and its tax havens to underpay tax.⁹

In contrast, only 1 country is currently rated as “harmful” by the OECD: Trinidad and Tobago. The country is not rated on the Corporate Tax Haven Index because it did not meet the criteria even to warrant being monitored on the index the last time the index’s country coverage was expanded in 2021.¹⁰

The index, however, reveals a different picture taking place within the UK. The UK scored favourably for increasing its corporate income tax rate and introducing new reporting measures on large companies’ “uncertain tax positions” that help the UK’s tax authority better audit multinational corporations accounts, and in turn deter multinational corporations for abusing tax.

While much room remains for improvement in the UK, the small progress enjoyed is a sign of the UK shifting to a “post-tax competition” era while its unchanged tax havens continue to undermine other countries’ efforts to make similar progress, the Tax Justice Network says.

UK trying to “kill” best shot in a century at ending global corporate tax abuse

The Corporate Tax Haven Index’s findings follow the latest attempt by the UK to obstruct countries at the UN, largely led by African countries, from delivering the biggest shakeup in history to global tax rules.

In 2022, countries at the UN decided by unanimous consensus to begin the process of establishing a UN framework convention on tax that would move decision-making on global tax rules away from the OECD and to the UN. Countries cited the OECD’s responsibility for designing a global tax system that loses nearly half a trillion dollars to tax havens every year, the OECD’s failure to include the majority of countries meaningfully in its decision-making process, and its failed, decade-long attempt at ending global corporate tax abuse as some of the reasons informing their decision to move beyond the OECD.¹¹

Countries are projected to lose $4.8 trillion to tax havens over the next 10 years by staying the course with the OECD, the Tax Justice Network reported in 2023.¹² A UN tax convention was identified as the best possible option available to countries to avert this outcome.

The UK has consistently sought to obstruct the UN process at every milestone since 2022 and has been called out in the press by diplomats for negotiating in bad faith and attempting to “kill” the process.¹³ EU countries were accused of the same but recently withdrew their opposition, leaving the UK further isolated.

At all three votes held in the UN process so far – the first in 2022 decided by unanimous consensus rather than voting, followed by a vote in November 2023 and in August 2024, both of which passed with large majorities – the UK introduced last-minute amendments seeking to water down, delay or entirely erase the outcomes and agreements that countries had secured through negotiations. All UK amendments were summarily rejected by majority vote.¹⁴

Despite the UK’s consistent attempts at obstruction, opposition to a UN framework convention is shrinking. The latest vote in the process saw the UK and just seven other countries oppose the direction of travel. The other seven were: Australia, Canada, Israel, Japan, New Zealand, South Korea and the US.¹⁵

Liz Nelson, director of advocacy and research at the Tax Justice Network, said:

“The UK’s ‘rules for me, not for thee’ attitude is exactly why countries must press on with plans to agree global tax rules democratically at the UN. The UK is protecting its economy with better tax rules, while sabotaging countries at the UN from getting out from under the thumb of British tax havens. Tax havenry is a lose-lose game and this is made painfully clear by the UK trailing behind its peers on so many benchmarks. The UK must recognise its old road of tax havenry is a dead end. The UK can either lend a hand or get out of the new road the rest of the world is paving.”

New UK government urged to break with predecessor

British tax havens’ performances on the index, and the UK’s conduct at the UN, are mostly a reflection of the decisions and approaches taken by previous UK governments. The Tax Justice Network is urging the UK’s new Labour government to make good on the break with the past it alluded to before entering government.

David Lammy, UK Foreign Minister, said in a speech¹⁶ the month before entering government, citing the previous edition of the Corporate Tax Haven Index:

“Britain’s regime are giving with one hand but turning a blind eye to theft with the other…Britain and its global family represent 31.5% of the global architecture that facilitates corporate tax haven jurisdictions. Now, we all know that many of the UK’s cherished overseas territories are not involved in financial services and real progress has been made including on cooperation with law enforcement and coming off blacklists: But we must go further and faster. As it remains the case that three out of four of the offshore jurisdictions with the highest risk of involvement with international corruption are UK Overseas Territories. This is a contradiction that cuts into our credibility. We must be honest about this and we must solve it together.”

Sara Hall, deputy director at Tax Justice UK¹⁷, a UK-based NGO, said:

“Labour’s commitment to cracking down on tax abuse in its manifesto is a welcome move. However, this will run into the ground if the UK’s tax havens are still rife with tax dodging and other criminality. The new government has the opportunity to set out clear expectations for the BVI and other Overseas Territories to adopt the same transparency measures as the UK itself has. Matching this action with support for better global standard setting on tax, like the UN Tax Convention, would show that the new government will be a responsible player when it comes to international tax reform.”

Liz Nelson said:

“The UK’s new government now faces a crucial decision. Will it stay in the diplomatic corner that the previous government has backed it into, and continue to reject the overwhelming global momentum for an inclusive and effective global tax body at the UN? Or will the new government deliver on its commitment to principles of honesty and fairness, and become a champion instead?”

Reacting to the Corporate Tax Haven Index’s latest findings, a spokesperson for UK Foreign, Commonwealth and Development Office said:

”The government is working closely with the UK Overseas Territories and Crown Dependencies to increase transparency, including through publicly accessible registers of company beneficial ownership.”

EU countries responsible for a third of corporate tax abuse risks

EU countries were found to be responsible for a third (33%) of the corporate tax abuse risks identified by the index. While many EU countries are significantly exposed to corporate tax abuse, the EU also includes some of the most damaging corporate tax havens.

The EU hosts the OECD and accounts for around three quarters of its membership. The EU has long opposed the creation of a globally inclusive tax forum under UN auspices. But in August 2024, the EU withdrew their opposition to the negotiation of a UN tax convention. Whether the bloc will become more actively supportive will be made clearer soon as countries prepare to vote on the next milestone in the UN process in the coming two months.¹⁸

Mixed picture on anti-tax abuse rules

Many EU countries made improvements in their rules on royalties and service fees, making it harder for multinational corporations to exploit these payments to underpay tax.

However these improvements were marred by major loopholes found in the EU’s Anti-Tax Avoidance Directive’s rules on controlled foreign companies. The most prominent of these is a loophole which requires countries to exempt a multinational corporation from the rules if it can show that its business arrangements are not “wholly artificial” arrangements created to underpay tax.

However, the Directive does not give guidance on how to evaluate what is or is not artificial, allowing multinational corporations to use the same methods they’ve been using to cook the books for decades to secure exemptions from these rules, and giving EU countries’ tax authorities the ability to play along.

Generally, EU countries with more carve-outs in their implementation of controlled foreign company rules tended to rank higher on the index than EU countries with less carve-outs.

The Tax Justice Network submitted evidence¹⁹ collected in the process of updating the Corporate Tax Haven Index to the EU Commission’s review of the Anti-Tax Avoidance Directive. In addition to calling on the exposed loopholes to be addressed, the Tax Justice Network is calling on the EU to expand the directive to cover rules on royalties and service fees.

Ireland enters top 10 for the first time as it seeks to shed tax haven image

Ireland ranked 9th on the index, entering the index’s top 10 positions for the first time since the index began in 2019. Ireland’s rise was largely due to the lack of change in its anti-tax abuse laws, causing it to fall behind other countries on the index.

While Ireland continues to have some of the worst scores on the index’s indicators among EU countries – tying Cyprus for the worst total indicator score by an EU country – most other EU countries saw their scores improve to different degrees, further expanding the gulf between Ireland and its EU peers.

Ireland’s tax policy has been repeatedly challenged by UN bodies and experts for possibly violating core human rights treaties including the Convention on the Rights of the Child and the Covenant on Economic, Social and Cultural Rights, by undermining other countries’ abilities to collect the tax they are due and need to deliver on their human rights obligations.²⁰ In response, the Irish government has often claimed it has shed its past tax haven ways. The Corporate Tax Haven Index did not find any changes to Ireland’s anti-tax abuse laws that could support this claim.

Other regional findings

African countries on the ranking were found to be responsible for just 4.4 per cent of corporate tax abuse risks measured by the index​. While lower income countries lose less amounts of tax to corporate tax abuse than higher income countries, lower income countries’ tax losses represent a larger share of their governments’ incomes. Lower income countries tax losses are equivalent to about half their public health budgets, whereas higher income countries tax losses are equivalent to 9 per cent of their public health budgets.²¹

Mauritius, the highest ranking African country on the index coming in at 15th, continues to see more regional corporate financial activity concentrate within its borders. 58 per cent of corporate financial activity entering and exiting African countries that are ranked on the index is concentrated in Mauritius, up from 56 per cent since the index’s last update in 2021.

Latin American countries on the index were found to be responsible for 3.4 per cent of corporate tax abuse risks measured by the index.

Brazil, which has been leading global efforts on progressive tax reforms at the G20 and supporting the process towards a UN tax convention, saw the biggest weakening of anti-tax abuse laws among Latin American countries. Brazil, which formally began the accession process to join the OECD in 2022, worsened its scoring on the index’s indicators after adapting some of its anti-tax abuse laws to weaker OECD standards, making the country more vulnerable to multinational corporations underpaying tax.²²

Rolling updates introduced to ranking

The Tax Justice Network has made changes to how the Corporate Tax Haven Index is published. Up until now, the index was updated once every two years. For each update, all the indicators on the index – against which countries’ laws and regulations are assessed – were updated simultaneously. Starting today, the index will be updated on a rolling basis in batches. Each batch will include updates to a set of indicators, following the index’s new update cycle.

The new approach allows the Corporate Tax Haven Index to capture regulatory change closer to when it occurs and to offer a more dynamic view of countries’ complicity in enabling global corporate tax abuse.

Today’s update consists of updates to 7 of the index’s 18 indicators. Most of these indicators assess countries’ anti-tax abuse regulations. The index update also consists of a number of “supplementary updates” – ie, regulatory changes pertaining to indicators that are not part of the current batch, but were brought to the Tax Justice Network’s attention, verified by its researchers and updated on the index as part of the current batch ahead of cycle. Lastly, today’s update also includes new data on the scale of corporate financial activity entering and exiting countries – this metric is updated annually. A detailed log of all changes captured in today’s index update is available on the Corporate Tax Haven Index’s website.²³

-ENDS-

View the Corporate Tax Haven Index

Notes to editors

• What about the new global minimum tax rules (GloBE)?
  It is widely misreported that a new “global minimum tax rate” has been widely accepted and adopted by most countries. This is not the case. Adoption so far has been limited to a few countries, with other countries stating either an intention to adopt the rules or to accept the consequences of other countries’ adoption of the rules. Major world economies like the US, China, India, Russia and Brazil have not made any effective plans to implement the GloBE rules, making it doubtful whether critical mass for global implementation will ever be achieved. Moreover, some countries, like Switzerland and Viet Nam, are already actively looking for ways to return the collected tax revenue back to multinational companies in the form of subsidies. The Corporate Tax Haven Index does not factor GloBE rules that countries may or may not have adopted in its evaluation for three reasons. First, the rules are too limited in scope to deliver on their purpose. Because of this, the rules do not meet the Corporate Tax Haven Index’s “weakest link” principle, which treat a rule as unfit for purpose if the rule has enough loopholes to exclude a substantial share of the untaxed revenues the rule targets. Case in point, the GloBE rules only apply to the largest multinational corporations, but a recent investigation by Bloomberg confirms that the 100 biggest US firms are not expecting to pay materially more tax under the new rules. This confirms warnings long voiced by leading experts and campaigners on the ineffectiveness of GloBE rules. The GloBE rules are expected to generate much less tax revenue than the OECD had projected, particularly for lower income countries. Second, the poor design of GloBE rules adds significant, unnecessary complexity and draws heavily on scarce resources of tax administrations, making the rules unfit for implementation and particularly challenging for lower income countries. Third, the rules do not address the more fundamental problem of how profits are relocated away from the countries where they are created. Under GloBE rules, taxing rights are primarily given to the countries where a multinational corporation has its headquarters, instead of where the corporation conducts its business activity. This rewards rich corporate tax havens, particularly European ones like Ireland, Switzerland, Luxembourg and the Netherlands, which have long been used as a profit shifting destination to move profits out of the countries where multinationals create and sell goods and services.  Taking all the above into the account, the Corporate Tax Haven Index cannot justify scoring countries positively or negatively for implementing or not implementing tax rules that: are unfit for purpose and will generate little to no tax revenue; are too costly and difficult to implement; and ultimately reward rich corporate tax havens.

1. Go the Corporate Tax Haven Index website to see the latest update.
2. 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 favour 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.
3. A summary of how the index works and its indicators is available on Corporate Tax Haven Index website.
4. Royalties and service fees are key income types used by multinational groups to plan their tax liabilities. Profits from the sale of goods and services to third parties or from the extraction of natural resources are usually difficult to relocate: they appear on the books of the group company that carries out the activity. By making these companies pay (and tax deduct) vast amounts of royalties and services fees to other group companies located in low tax jurisdictions, the multinational group essentially turns high-taxed profits into low-taxed profits. This practice can only be curtailed by imposing limits on the use of intra-group deductions for royalties and services. Such deductions are commonly accepted for intra-group interest payments but few countries impose similar limitations on royalties and services. The Royalties Indicator and Services Indicator on the index map global country practice and favourably score countries with solid deduction limitations.
5. More information on the Double Irish Dutch Sandwich scheme here and here.
6. Controlled Foreign Company (CFC) rules are important anti-tax abuse rules to prevent multinational groups from shifting profits from the parent jurisdiction to subsidiaries in low-tax jurisdictions. CFC rules prevent long-term and artificial deferral of taxes by enabling parent jurisdictions to tax profits earned by foreign subsidiaries in low tax jurisdictions without these profits effectively being distributed to the parent company. Since BEPS 1.0, CFC rules are common in many jurisdictions. These rules come however in various shapes and sizes, some less effective than others. The CFC Indicator on the index scores countries in function of the effectiveness of their CFC rules. Go to the Corporate Tax Haven Index website to see how countries scored on individual indicators.
7. The British Virgin Islands and Cayman currently do not levy corporate income tax, and Bermuda levies a ‘light version’ of a corporate income tax that only applies to companies that are part of a multinational group with at least EUR 750 million in consolidated revenue. The three jurisdictions do not levy withholding tax on outbound dividends; do not have anti-tax abuse rules (since they do not levy tax on local profits to begin with); and do not require the filing and making public of company accounts. These are just some of the practices that contribute to the jurisdictions’ extreme scores on the index’s indicators.
8. The OECD policy is one of the key components of the set of global rules the OECD launched in 2015 to tackle tax abuse by multinational corporations, known as the BEPS (Base Erosion and Profit Shifting) Action Plan. The plan included a number of global standards, four of which were required to be committed to by OECD and Inclusive Framework members as minimum standards. The Action 5 Report on Harmful tax practices has resulted in one of the four binding minimum standards under BEPS 1.0. Under Action 5, “members commit to participating in a peer review by the OECD Forum on Harmful Tax Practices, which has been conducting reviews of preferential tax regimes since its creation in 1998 in order to determine if the tax regimes could be harmful to the tax base of other jurisdictions.” The current work of the Forum on Harmful Tax Practices (FHTP) comprises three key areas. “Firstly, the assessment of preferential tax regimes to identify features of such regimes that can facilitate base erosion and profit shifting, and therefore have the potential to unfairly impact the tax base of other jurisdictions. Secondly, the peer review and monitoring of the Action 5 transparency framework through the compulsory spontaneous exchange of relevant information on taxpayer-specific rulings which, in the absence of such information exchange, could give rise to BEPS concerns. Thirdly, the review of substantial activities requirements in no or only nominal tax jurisdictions to ensure a level playing field, where the first assessment is not applicable.” The Tax Justice Network only looked at the first and third areas of assessment in its analysis of the OECD’s harmful tax practices ratings. This is due to two reasons: First, under the second area of assessment, the OECD does not provide countries with a rating. It only provides countries with recommendations for further action or no recommendation for action. It would be unfair to conclude that countries given no recommendations are considered non-harmful by the OECD and those given recommendations are considered harmful by the OECD. Hence, the Tax Justice Network only looks at ratings under the first and third assessment where language of harm is employed by the OECD. Second, the Tax Justice Network considers criteria used under the second area of assessments on exchange of information on tax rulings too weak to yield valuable insight by analysing.
9. Estimates from the State of Tax Justice 2023.
10. The Corporate Tax Haven Index prioritises evaluating and ranking countries that are likely to be contributing to, or perceived to be contributing to, global corporate tax abuse. Among the factors that determine whether a country is ranked on the index is anecdotal evidence of the country enabling global corporate tax abuse (eg leaks, investigative media stories, legal cases, etc) or if data on the misalignment between where multinational corporations are conducting genuine business activity and where they declare profits reveals the country to be a signification destination for the latter.
11. Information on the UN tax convention is available here. See note 13 for summaries of key milestones in the UN process towards a convention. See this open letter from leading economists on the need for a UN tax convention, and this open letter from 200+ NGOs calling on countries to back a UN tax convention. More commentary from ministers and economists available here.
12. Estimates from the State of Tax Justice 2023. Read our press release on our report for a summary.
13. See the FT article in which the UK and EU were accused of negotiating in bad faith and attempting to “kill” the UN tax convention.
14. See recaps of the UN resolutions passed in November 2022, November 2023 and August 2024.
15. See note 2.
16. A recording of UK Foreign Minister David Lammy’s speech from May 2024 is available here. A full transcript is available.
17. Tax Justice UK campaigns for a fairer tax system that takes more from the very wealthy. A tax system that actively redistributes wealth to tackle inequality; and that funds high quality public services. Tax Justice UK’s mission is to ensure that everyone in the UK benefits from a fair and effective tax system.
18. See note 2.
19. The Tax Justice Network’s submission the EU’ consultation on the Anti-Tax Avoidance Directive is available here.
20. See, for example: Committee on Economic, Social and Cultural Rights, 2024. Concluding observations on the fourth periodic report of Ireland And Committee on the Rights of the Child, 2023, Concluding observations on the combined fifth and sixth periodic reports of Ireland.
21. Estimates from the State of Tax Justice 2023.
22. Brazil, which formally began the accession process to join the OECD in 2022 and introduced OECD style transfer pricing legislation in 2023, has worsened its scoring on the index’s anti-tax abuse indicators. This is a result of the country abolishing its existing deduction limitations on intra-group royalty and services payments which were deemed redundant after the introduction of the new OECD style transfer pricing rules. However, the new transfer pricing rules are not sufficient to limit the excessive use of intra-group royalty and services transactions and provide Brazil with less protection against this than its previous rules did. Brazil is now more vulnerable to multinational corporations cheating on tax due to this change.
23. A log of latest updates to the Corporate Tax Haven Index is available on the “Latest updates” webpage on the index’s website.

Source: Tax Justice Network