‘Sustainable’ companies hide behind subsidiaries in secretive tax havens
The UK’s 100 largest public companies have nearly 30,000 subsidiaries, according to new research by Christian Aid
Christian Aid has accused many of the largest companies that claim to be driving corporate responsibility of operating behind a veil of secrecy by creating thousands of subsidiaries in tax havens.
The UK’s 100 largest publicly traded companies own nearly 30,000 subsidiaries between them, the NGO discovered in a recent study. It found it impossible to gather even basic information such as turnover, assets or shareholder funds from around a fifth of these.
Accessing information about the subsidiaries was simple and free in only a quarter of cases. The rest required payment either to public authorities or private databases.
Christian Aid, which has been campaigning for years to force companies to pay their fair share of taxes, reported that the mining sector was the worst offender, having the highest proportion of subsidiaries for which no information is available, followed by the oil and gas sector and insurance companies.
Finance and investment companies had the largest number of subsidiaries operating in the most secretive tax havens. The NGO said the most transparent sectors were real estate, retailers, building materials and aerospace and defence.
“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,” said Katharine Teague, co-author of the FTSEcrecy (pdf) report.
“Transparency won’t guarantee well-behaved firms but it is a necessary condition for it. We were shocked by how little information is freely available about most companies’ subsidiaries. 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.”
Transparency International, an NGO that monitors and publicises corporate and political corruption, said that while there could be legitimate reasons for using shell companies based in tax havens, they were often used to hide illegal activity.
Referring to the record of mining companies, a spokesman said they should “view transparency as a default option. Some extractive companies have realised that the modern world is more transparent, others continue to fight transparency in the courts and through their lobbying. Clean companies that have nothing to hide should have no fear of transparency.”
Mining multinational Anglo American responded to the report by claiming to be both “transparent and wholly compliant in its reporting”, while Rio Tinto did not respond to inquiries.
One spokesman for a FTSE 100 company, who did not want to be named, said that while it was important for information regarding major operating subsidiaries to be easily accessible, the majority of subsidiaries were dormant legacy companies.
He also questioned Christian Aid’s definition of non-transparent jurisdictions, which includes most of the EU and OECD.
Christian Aid says it used the Financial Secrecy Index as the basis for concluding that more than 90% of the FTSE100 subsidiaries were based in places defined as secrecy jurisdictions.
Almost half of those subsidiaries are in the UK, defined as “moderately secretive”, while 14% are in “highly secretive” tax havens such as Switzerland, Luxembourg, Hong Kong, Bermuda and the Cayman Islands.
The report recommends that governments require all companies to publicly report their accounts on a country-by-country basis, with data including profits made and taxes paid.
Christian Aid also calls for all jurisdictions to require companies registered in their territorries to submit annual statutory accounts, including audited balance sheets, profit and loss accounts, cash flow statements and directors’ report or annual returns.
The Financial Conduct Authority (FCA), which regulates 50,000 UK companies including the FTSE100, did not comment on the Christian Aid report or its recommendations.