Labour accuse Boris Johnson of turning blind eye to tax haven use by public service contractors

Labour has accused Boris Johnson of turning a blind eye to tax havens, as the party released new research showing that £44bn of public money has gone in contracts to companies with links to territories of concern.

Almost eight out of 10 (77.5 per cent) of the government’s “strategic suppliers”, providing services and goods on a massive scale to public sector organisations, have connections of one kind or another with tax havens – often small island territories which attract businesses by keeping corporation tax rates ultra-low – said Labour.

And the proportion has been growing under Mr Johnson’s leadership, from an estimated 73.5 per cent in 2019 when he came to office.

The party is calling on chancellor Rishi Sunak to throw the UK’s weight behind a global minimum corporate tax rate of 21 per cent at a key meeting of finance ministers from the G20 group of major economies later this month.

A global rate came a step closer on Friday with the agreement of 136 countries and jurisdictions – including many of those branded tax havens – to implement a 15 per cent minimum tax from 2023, as well as to ensure that a quarter of any profits above 10 per cent made by global firms are reallocated for tax purposes to the countries in which they operate.

After years in which multinational companies, including online tech giants, have been accused of minimising payments by shifting profits to countries with zero or low-tax regimes, Mr Sunak said the agreement created a “clear path to a fairer tax system, where large global players pay their fair share wherever they do business”.

But Labour accused the chancellor of standing in the way of a tougher 21 per cent minimum, initially proposed by US president Joe Biden, building on proposals drawn up by the Organisation for Economic Cooperation and Development (OECD).

Labour made no specific allegations against individual companies in its analysis of government contracts.

But it found that some 31 out of the 40 firms classed as strategic suppliers – because they receive contracts worth more than £100 million per year or are deemed significant to their sector – have links to countries regarded as tax havens because they operate either zero-tax corporate regimes or levy 10 per cent or less on company profits.

These links range from owning subsidiaries or group entities in territories such as Jersey, Guernsey, the British Virgin Islands, Cayman Islands or Bermuda to having registered tax residence in such places.

The new analysis comes in the wake of the publication of the so-called Pandora Papers, detailing the use of tax havens to minimise payments, and revealing the extent to which they have been used by major Conservative donors.

Speaking ahead of the 13 October meeting of G20 finance ministers in Washington, Labour’s Treasury spokesperson James Murray said: “The prime minister and chancellor have repeatedly turned a blind eye as British businesses on our high streets are undermined by tax-dodging tech giants like Amazon.

“The chancellor must use the G20 finance ministers’ meeting this month to finally back a global minimum corporate tax rate of at least 21 per cent as we and others have been calling for.

“In his conference speech this week, the chancellor said he cared about tax dodging.

“Now he needs to show that’s not just talk – especially given the serious recent revelations about Tory donor links to tax havens and senior Russian sources.

“Labour would take the lead on this once-in-a-generation opportunity to secure a strong global pact to tackle worldwide tax dodging. Ending the race to the bottom is crucial to taxing fairly, and to helping our high streets and British businesses to thrive.”

Shadow foreign secretary Lisa Nandy last week launched a new taskforce on illicit finance with the aim of making the UK the most inhospitable place in the world for dirty money and ill-gotten gains.

Labour’s dossier listed companies including BAE Systems, which it said had won contracts worth £14.7bn since Mr Johnson took office in July 2019 and has listed subsidiaries in Jersey, Qatar and the Isle of Man, as well as Serco (£6.8bn in contracts, subsidiaries in Qatar, Bahrain, Guernsey, Jersey and UAE), EY (£6.6bn in contracts, entities or member firms in Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Bahrain, Gibraltar and Isle of Man) and KPMG (£2.8bn in contracts, subsidiaries in Guernsey, Gibraltar and Bermuda).

The Independent reached out to the companies for comment. An EY spokesperson said: “EY is a global organisation operating in over 150 countries across the world. We are committed to complying with all laws and regulations in all jurisdictions.”

A Serco spokesperson said: “Serco is an international business operating in many countries. These subsidiary companies exist to enable us to delivery services in the countries concerned, for example we employ 3,000 people in the Middle East delivering essential services such as air traffic control and defence base support, and manage leisure centres in the Channel Islands.”

A government spokesperson said: “The government has high standards and expects that public sector suppliers will pay the tax they are obliged to. “Non-payment of taxes is already an exclusion ground and this feature is maintained in the Procurement Green Paper.

“We’ve led the world in tackling tax avoidance and evasion and in improving tax transparency, spearheading global initiatives to help tax authorities uncover income and assets held by their taxpayers.”