OXFAM has called for action to close a legal loophole that has seen a booming number of Scottish shell firms used for tax dodging and money laundering.
The global charity warned that the country was becoming one of the world’s “secret tax havens where the privileged minority hide billions from authorities”.
READ MORE: Agenda: Oxfam calls for end to tax haven loophole
Its demand came as The Herald obtained new figures showing that the firms providing the loophole – Scottish limited partnerships or SLPs – were thriving like never before.
The total number of off-the-shelf businesses advertised in Ukraine, Russia and elsewhere as “offshore zero-tax companies” has jumped by a quarter in just a year and is now close to 25,000.
Analysis hows thousands of such firms – often registered at virtual offices across Scotland – are owned in secretive tax shelters and are effectively able to act with a complete lack of accountability.
In a progressive and inclusive Scotland, there can be no place for dodgy tax practices,” said Lisa Stewart of Oxfam Scotland.
“First Minister Nicola Sturgeon has promised a ‘zero tolerance’ approach to tax avoidance in Scotland, and Justice Secretary Michael Matheson said earlier this year he was open to reviewing Scottish Limited Partnerships and to making representations to UK ministers.
“In the light of these revelations it is imperative that this loophole is closed immediately. It cannot be in Scotland’s interests to join the club of ‘secret tax havens’ where a privileged minority hide billions from tax authorities.
"These structures also rob the world’s poorest people of billions in lost revenue every year. Neither the Scottish nor the UK Government should allow this kind of flagrant exploitation of our tax laws. Both governments must urgently work together to close this loophole once and for all.”
READ MORE: Agenda: Oxfam calls for end to tax haven loophole
The Scottish Government has already said it will hold talks with the UK about SLPs. All corporate law, including Scots law, is reserved to Westminster.
Green MSP Andy Wightman has been campaigning for reform of such companies to prevent them from being used as defacto tax havens within UK borders.
He said: “Scotland is clearly the favoured place to set up limited partnerships.
"This is undoubtedly due to the fact in Scotland, such partnerships have legal personality, can be set up very easily, are subject to very little scrutiny and accountability and despite calls for reform going back over a decade, neither the Scottish nor UK governments has done anything to clean up the widespread abuse that has become evident in recent years.”
Figures scraped from the website of the UK’s corporate register, Companies House, show that there were around 5,600 Scottish limited partnerships created between May 2015 and April 2016. Most of these were registered at addresses in virtual offices across Scotland and had two partners based in traditional offshore jurisdictions.
READ MORE: Agenda: Oxfam calls for end to tax haven loophole
This is the explicit model advertised in Baltic, Ukrainian and Russian agencies as a way of avoiding tax. Packages for such shell companies often include nominee directors, power of attorney to control their actions, UK certificates of good standing and postal addresses in Scotland.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article