In his budget last month George Osborne announced that if in the future a UK company runs its internal banking arrangements through a tax haven subsidiary it will benefit from a special tax rate of just 5.75 per cent of the resulting profits. The rate is exceptionally low: the same activity undertaken in the UK is taxed at 23 per cent. It is a change that will delight corporate tax avoiders everywhere: the UK will now condone the use of tax havens in locations such as the Cayman Islands, Jersey and the Isle of Man. It is expected that by 2016 more than one sixth of corporation tax will come from such offshore activities.

LRB 14 April 2011 | PDF Download