MPs are prepared to look at ways of forcing the crown dependencies of the Channel Islands and the Isle of Man to introduce public registers of company ownership if they are not willing to, in the wake of this week’s decision by parliament to insist that the overseas territories do so.

Andrew Mitchell, a Conservative, and Labour’s Margaret Hodge want ministers to tell the crown dependencies to fall in line by the end of the decade – and said if necessary they would see if it was possible to compel them to from Westminster.

“We expect the government to use its good offices to persuade the crown dependencies to introduce public ownership registers,” Mitchell said. “But if they do not, parliament will return to the charge.” The two MPs had believed that the constitutional position of the crown dependencies was different and they excluded them from their amendment to the sanctions and anti-money laundering bill that was agreed on Tuesday after the government caved in at the last minute.

The amendment required the 14 overseas territories, including the Cayman Islands and Bermuda, to introduce public ownership registers by the end of 2020 or have the requirement imposed by the UK.

The chief minister of the Isle of Man, Howard Quayle, was in London on Tuesday to lobby successfully against a separate Labour amendment that would have tried to force the crown dependencies into disclosing the true owners of companies. The amendment was dropped.

The crown dependencies elect their own legislatures and run their own domestic legislation. But there is some precedent for the UK to impose its will: in the case of the Isle of Man, parliament extended the 1967 Marine Broadcasting Act to the Isle of Man in order to shut down Radio Caroline which was broadcasting from a “pirate ship” offshore.

Mitchell’s comments came as the Cayman Islands government said it was considering legal action in an attempt to stop the UK making it open up its company ownership registers to public scrutiny.

The premier of the Cayman Islands, Alden McLaughlin, said the territory was keeping all options on the table, including a legal challenge to the amendment, and accused MPs of making a decision that was “reminiscent of the worst injustices of a bygone era of colonial despotism”.

The territory was joined by Bermuda, which questioned whether the newly passed legislation was constitutional, while others in the 14 jurisdictions representing the remains of the British empire said it would be punitively expensive to implement.

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What are the Panama Papers?

The Panama Papers are a leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with a network of international partners, including the Guardian, in April 2016.

The documents show the myriad ways in which the rich exploit secretive offshore tax regimes. Twelve national leaders were among 143 politicians, their families and close associates shown to have been using offshore tax havens. They included the Pakistani prime minister, Nawaz Sharif; the former vice-president of Iraq, Ayad Allawi; the president of Ukraine, Petro Poroshenko; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.

An offshore investment fund run by the father of the then British prime minister David Cameron avoided paying tax in Britain by hiring residents of the Bahamas to sign its paperwork.

The leak is larger than the US diplomatic cables released by WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013.

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David Burt, the premier of Bermuda, said parliament’s action was a retrograde step after 50 years of “constitutionally sanctioned self-government”. He added that the island territory would take necessary steps to ensure its constitution was respected.

The Cayman Islands and Bermuda are among the larger financial centres within the 14 overseas territories, which all operate a secretive financial system and have not been obliged to publicly state the true owners of companies.

However, backbench MPs led by Hodge and Mitchell, aided by a rebellion of at least 20 Tory MPs on Tuesday passed the amendment forcing the government to require the territories to change their system. Hodge said it was a “world-changing measure in relation to the fight against corruption”.

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Offshore tax evasion: top 10 most secretive jurisdictions

1. Switzerland (1)•

2. U​nited States (3)

3. Cayman Islands (5)

4. Hong Kong (2)

5. Singapore (4)

6. Luxembourg (6)

7. Germany (8)

8. Taiwan (new entry)

9. United Arab Emirates (10)

10. Guernsey (17)​

The Tax Justice Network ranks countries and jurisdictions on the size and secretiveness of their offshore sectors
•Bracketed items refer to 2015 placing

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Leaks such as the Panama Papers and Paradise Papers, reported by the Guardian and a consortium of investigative journalistic organisations, revealed that dictators and oligarchs from around the world channel money through companies in the overseas territories. About half the companies referred to in the Panama Papers were set up in the British Virgin Islands (BVI), according to Transparency International.

British politicians are confident they have the right to intervene in the overseas territories, which are normally self-governing. Britain forced the territories to abandon capital punishment in 1991 and decriminalise homosexuality in Caribbean territories in 2000. However, more recently, Boris Johnson, the foreign secretary, decided not to intervene when Bermuda repealed same-sex marriage legislation.

The Caribbean territories say that the region is struggling to recover after the impact of Hurricane Irma. The BVI has indicated it generates about $100m (£73m) a year from company registration and related activities – and said that the UK government should foot the bill if it wanted to introduce public registers.


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