Slow UK aid for hurricane-hit islands linked to tax haven ties

Anguilla’s ex-attorney general says UK government may fear exposing its role in Caribbean territories’ tax arrangements

Aid offered by the British government to its hurricane-battered territories in the Caribbean has been dismissed as “derisory” by a former attorney general of one of the worst-hit islands.

Rupert Jones, who completed a two-year posting to Anguilla last year, suggested the government’s reluctance to commit significant aid may be motivated by embarrassment over its role in sustaining tax havens in the region.

In an article for the Guardian, Jones dismissed as “a drop in the Caribbean Sea” the £32m allocated by the government for British overseas territories hit by the most powerful Atlantic storm on record.

He pointed out that the foreign secretary, Boris Johnson, who is expected to travel to Anguilla to highlight British aid efforts, had indicated that £28m of the aid had already been spent. “Are we to believe it will only release a further £4m? This would be derisory – it would not even pay to rebuild one school,” Jones wrote.

His criticism will increase the pressure on the government over its slow response to the disaster.

Jones questioned whether the government’s slowness may have been linked to its fear of exposing the islands’ controversial tax arrangements, and its own failure to tackle them.

As attorney general to Anguilla, Jones had a front-row seat on how it and other islands are used by hundreds of thousands of companies to avoid tax, and how the British government turns a blind eye.

“There have been longstanding reports that the islands are havens for corruption, tax avoidance and money laundering,” he wrote. “Much of their offshore wealth emanates from the UK. The Panama Papers exposed the level of BVI [British Virgin Islands] ownership of London property. I would hope this publicity will not cause the UK government such embarrassment that it would seek to distance itself from the islands.”

He added: “Legislative attempts to end these secretive arrangements so far have been a fig leaf: last year’s compromise agreements fell short of requiring public registries of the beneficial ownership of companies registered in the islands … It may fear to do so because it would highlight the UK’s ultimate responsibility. Both UK and local politicians also recognise that the islands’ economies, heavily reliant on offshore financial services, might flounder with the major loss of jobs.”

Richard Murphy, a fair-tax campaigner who Jones cites in his article, said any UK aid to rebuild its territories should be conditional on the islands being more transparent about the accounts of companies and individuals registered in their domains.

Murphy told the Guardian: “Humanitarian aid should be unconditional. But reconstruction aid should not be one way. If [the territories] need us, and they do, we need them to honour their commitments to the UK, but the reality is they use their quasi-independent status to undermine our tax law. It is no longer acceptable for them to say we need you desperately but we do not have to respect your right to impose tax in the way that you wish.”

Murphy agreed with Jones that the UK government was keen to avoid awkward questions being raised about tax on the islands.

“There is an embarrassment about this relationship. It is about why are we happy to pay when they don’t. And why do we permit this tax haven activity to take place in the first instance?”

Murphy said the impact of Hurricane Irma would test the ability of the BVI to operate as tax havens for hundreds of thousands of companies.

“Many of the BVI companies rely on the fact that there is a back-office facility in the BVI to support whatever they are doing. They need trustee arrangements, or directors who are located there to record decisions that they supposedly take.

“If those people can’t function at the moment are these companies going to fall off the rails now that its motion is not being oiled? Or are we going to discover they can carry on? If it does, what was the purpose of the BVI? Is it totally a charade?”

Robert Barrington, the executive director of Transparency International, said reconstruction of the islands provided an opportunity to change economies that had been based on secrecy.

In a blogpost triggered by questions from the Guardian he said those in immediate need should be helped without condition. But, he added, rebuilding the islands should involve a plan to ensure their economies were “not dependent on providing secret services that can easily be exploited by criminals … this is an opportunity to take stock and invest in systems for the future and not hang on to the failing systems of the past.”