Chancellor and PM warned by Save the Children to introduce greater transparency prior to G8
David Cameron and George Osborne were warned on Sunday they are in danger of losing credibility on their central agenda for their G8 chairmanship this year if they do not unilaterally introduce greater tax transparency in British dependent territories such as the British Virgin Islands.
In a letter to Osborne on Sunday, the leading aid charity Save the Children told the chancellor he has the powers to impose tax transparency on the British Virgin Islands.
The charity said there are fears that fresh exposures – including in the Guardian – about the scale of tax avoidance mean Cameron's credibility on the issue needs shoring up.
In a speech in Davos in January, Cameron promised to make tax transparency his number one goal for his G8 chairmanship.
The sherpas, or key advisers, for the G8 leading industrialised nationsmet on Sundayon Sunday in London, ahead of the summit in Northern Ireland in June.
Both the Japanese and Russians are looking for any excuse to block the calls for greater transparency, including a new standard on public beneficial ownership.
In his letter Save the Children chief executive Justin Forsyth urged the government to "consider hosting a meeting of crown dependencies and overseas territories ahead of the G8 to encourage these jurisdictions to implement the new gold standard of beneficial ownership transparency in their own interests
"To ensure that that is a success we'd urge the UK to signal now that if necessary, it is willing to force through these policy changes"..
The charity also claimed previous work by the Kilbrandon commission on the UK constitution shows the UK government has, in exceptional circumstances, powers to intervene in the dependent territories.
Forsyth says said he knows the issue of beneficial ownership register is on Osborne's agenda for G8, but added "as the current Guardian investigation has shown, some of the UK's own overseas territories are some of the worst offenders. If not addressed this could undermine the credibility of the UK to lead international action in this regard. To this end we would urge you to consider what action the UK can take.
"Your commitment to pursue new transparency standards could be transformative, not only in recovering revenues to deal with the UK's fiscal deficit, but in boosting revenues in developing countries, which are estimated to have lost as much as $859bn (£564bn) to illicit financial flows in 2010.
"Tax haven secrecy facilitates tax evasion, corruption and undermines the ability of governments to mobilise revenue to invest in lifesaving essential services. This can be a life or death issue for the poorest children in the poorest countries".
In the past, government ministers, including the former Labour home secretary Jack Straw, have made clear that the overseas territories and crown dependencies are sovereign jurisdictions and that the UK government does not have power to change their policies.
But the Kilbrandon commission on the UK constitution set up by Harold Wilson found in 1973 that the UK government was not a helpless bystander.
It ruled: "The United Kingdom parliament has the power to legislate for the islands, but it would exercise that power without their agreement in relation to domestic matters only in the most exceptional circumstances".
Forsyth argued "corruption, money laundering and illicit capital flight from the poorest countries would meet that bar of exceptionalism. We obviously hope that this isn't necessary but a strong signal that it's a possibility could actually make following through on the threat less likely."
The commission ruled the UK ultimately had responsibility for the good government of the islands.
There is also a precedent for intervention. In the case of the Turks and Caicos Islands, due to endemic corruption on the islands the UK parliament passed new legislation in 2009 that suspended ministerial government and the house of assembly.
The key G8 demand for aid charities and tax justice campaigners is for a "new standard on beneficial ownership transparency requiring G8 governments to implement a public register of the beneficial owners of companies".
The claim is that this would assist countries, rich and poor, to mobilise tax revenue to invest in life-saving interventions such as vaccines as well as the kind of infrastructure that will attract investment and promote prosperity in the long term.