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Leading companies censured for lack of transparency

by
16 May 2014

by a staff reporter

SHUTTERSTOCK

Off-shore view: Seven Mile beach, Grand Cayman

Off-shore view: Seven Mile beach, Grand Cayman

CHRISTIAN AID has accused leading UK companies of creating thousands of subsidiary companies in tax havens in order to conceal financial information.

The charity says that its research, published on Tuesday in the report FTSEcrecy, has found that FTSE 100 companies have created 29,891 subsidiaries, and that details of these subsidiaries' turnover, assets, shareholder funds, and number of employees are freely available in only one quarter (26 per cent) of them.

In others, information cannot be found, even if payment is made to the relevant authority, such as Companies House - although in the case of some companies, some fee-charging private databases were able to supply some information.

The co-ordinator of the report, Katharine Teague, said: "What our findings show is that secrecy is not the exception, but the norm, even among the largest 100 companies whose shares are 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."

Some 14 per cent of these subsidiaries operate in tax havens rated as "highly secretive", including Luxembourg, Hong Kong, Bermuda, and the Cayman Islands. Companies with the most subsidiaries in highly secretive jurisdictions are from the finance, banking, and mining sectors.

Ms Teague said: "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. Transparency won't guarantee well-behaved firms, but it is a necessary condition for it."

Lack of transparency is a significant barrier to sustainable growth and development. Last year, the African Union High Level Panel on Illicit Financial Flows said that Africa is losing $50 billion a year in illicit financial flows, draining the continent of much-needed resources.

Christian Aid, which has long campaigned for companies to pay their fair share of taxes, is urging the UK and other governments to require all companies to report their accounts on a public country-by-country basis, requiring them to publish data such as profits made, and taxes paid, separately, for each country in which they operate.

It also wants all jurisdictions to require companies registered in their territory to submit accounts each year.

A spokesman for a FTSE 100 company, who did not want to be named, told The Guardian newspaper that, although it was important for information regarding large operating subsidiaries to be easily accessible, the majority of subsidiaries were dormant legacy companies.

www.christianaid.org.uk/images/FTSEcrecy-report.pdf

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