UK 'is losing �4bn tax offshore'

"Squirrelled away" overseas money could help UK in recession, TUC says

The UK is losing at least �4bn a year through residents holding money in offshore tax havens, research claims.

Jersey, Guernsey and the Isle of Man were among popular spots for the wealthy to hold savings, the TUC said.

EU rules allow UK residents to declare interest earned overseas or to have 15% withheld from interest in the country where the account is held.

Separately, a report says MPs are calling for a review into the use of havens by taxpayer-backed banks.

Under the EU rules, three-quarters of the 15% in tax on interest that is withheld offshore is eventually paid to the UK government.

But this means that the effective amount collected by HM Revenue and Customs was 11.25% - rather than the 40% which would typically be paid, the TUC says.

'Simple story'

If the super-rich held their money and assets in the UK they would contribute at least �4bn extra Brendan Barber TUC

It produced its �4bn estimate by extrapolating data from an answer to a parliamentary question.

That data said that during the past three years, �319m of tax was lost on a total income from offshore accounts of �1.1bn for their holders.

But this was a "serious underestimate" said the TUC - which wants the EU Savings Tax Directive, which allows the tax benefit on funds held overseas, to be reformed.

"The mechanisms of tax avoidance are always hard to understand, but this is a very simple story. If the super-rich held their money and assets in the UK they would contribute at least �4bn extra," said TUC General Secretary Brendan Barber.

"This would be enough for the government to meet its target to halve child poverty by 2010. It would also mean that instead of being squirreled away in tax havens, it was being spent in the real economy here helping us fight recession.

"With the tax take falling because of the recession, there can be no better time to get tough with the super-rich, so many of whom did so much to throw the world into recession."

'No coherence'

In a separate development, the Sunday Times reported that opposition MPs are planning to call on ministers to disclose how much the offshore subsidiaries of taxpayer-funded banks were costing in lost revenue.

Lloyds has more than 125 offshore companies, the paper said, while Royal Bank of Scotland has 238.

There is no suggestion that banks have broken any laws by using offshore tax sheltering.

But shadow chancellor George Osborne told the paper that a lack of government action against offshore firms owned by banks which had been rescued by the taxpayer showed "a lack of coherent strategy".

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