NICOLA Sturgeon has launched an outspoken attack on Prime Minister Theresa May after Conservative MPs voted against moves to close a legal loophole that allows Scotland to be promoted as a tax haven overseas.
The First Minister was "disappointed" that an SNP amendment to a Finance Bill that would overhaul the century-old practice of Scottish limited partnerships (SLP) was voted down at Westminster earlier this week, adding that the move did "not sit well with the new Prime Minister’s stated commitment to taking on the unethical practices of some big businesses".
While accepting it was a reserved issue, Ms Sturgeon vowed to continue demanding action from the Conservative Government on SLP firms - legal entities marketed as tax avoidance vehicles which have been associated with corruption and money laundering.
At First Minister's Questions she said: "We need to be firm in saying that companies should pay the taxes that they are due to pay, because those taxes fund the public services that we all rely on.
"It is a reserved issue, as Patrick Harvie is aware, but SNP MPs in the House of Commons and the Scottish Government, to the extent that we are able, will continue to press for action in the area."
Her comments follow a series of revelations in The Herald over the use SLPS, which are widely marketed across Eastern Europe as tax avoidance vehicles and have been linked to a $1billion fraud in Moldova.
Unlike English partnerships, the Scottish firms do not have to provide financial reports or register for tax if it conducts its business overseas, with Scottish-based firms also being linked to profit laundering from gun-running deals, international diet pill scams and vodka industry corruption in Ukraine.
Yesterday, Green co-convenor Patrick Harvie urged Ms Sturgeon to back an Oxfam campaign which is urging Scottish political leaders to lobby for a change in the law. An SNP amendment to the UK Government's Finance Bill, that would have forced Conservative ministers to carry out a review of SLPs, was defeated by 304 votes to 248.
A statement by Oxfam calls on the Holyrood parties to ensure "Scotland isn't unintentionally helping tax dodgers" and to work together to support efforts to "immediately close tax and other loopholes".
Mr Harvie described the situation over SLPs as a "scandal" that was attracting growing attention. He added: "I hope that the Scottish Government will be vociferous in rattling the cage of the UK Government on the matter.
"Last year, I asked what the Scottish Government’s stance was on Scottish Limited Partnerships. Fergus Ewing’s answer was good on rhetoric but gave no commitment to action. The SNP’s recent calls for a review are therefore a welcome the break from last year’s unwillingness and I’m pleased that the First Minister supports the sentiments of the statement."
Around 500 SLPs are being incorporated each month and almost all are owned by shell companies based in traditional tax havens. While there can be legitimate reasons for setting up the partnerships, they are routinely advertised in eastern Europe as "zero-tax Scottish offshore companies". The legislation governing SLPs dates from 1907, with law enforcement experts warning they can be exploited to funnel money out of some of Europe's poorest nations.
Jamie Livingstone, the head of Oxfam Scotland, said: "Scotland should have no desire to be linked, in any way, to the practice of tax avoidance. Power to close any loophole rests at Westminster, but we believe a united stance from Scotland's political leaders will encourage urgent action by the UK Government."
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