Local councils have been caught investing billions in offshore tax-avoiding companies. With your money.

Panama Papers Tax Avoidance
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Campaigners have caught local councils investing billions of pounds into companies that use offshore tax schemes, with half a billion of it being public money. And ultimately, this means that these local authorities are putting your money into companies that don’t pay their fair share of tax.

Offshore energy 

A new report [pdf] by a group of campaign organisations including Friends of the Earth and Platform has been published. Called Councils: Fuelling the Fire, it details the amounts that local authorities invest in fossil fuel companies, via their employee pension schemes. And it found that they have pensions investments in corporations linked to the fossil fuel industry worth around £16.1bn.

While much of this is employee contribution that councils have invested on their behalf, local government pension scheme rules mean that the employer makes up between 14% and 18% of pensions contributions. So ultimately, between £2.25bn and £2.90bn of public money is going to fossil fuel companies.

But what the report doesn’t highlight is that many of the companies listed are well-known tax avoiders.

Offshore tax

For example:

  • Shell, with £1.8bn investment from councils. The Tax Justice Network reported in 2014 that Shell had eight subsidiaries in Switzerland, which “potentially allows the company to avoid paying a significant amount of taxes where its actual economic activities take place, including in developing countries”. It paid no UK corporation tax in the same year and operates 36 subsidiaries out of Bermuda.
  • BP, with £1.16bn investment from councils. It operates 11 subsidiaries out of Bermuda alone and paid [paywall] no UK corporation tax in 2014.
  • Centrica, the parent company of British Gas, with £203m investment from councils. As Ethical Consumer noted, Centrica has “high risk” investment and insurance subsidiaries operating out of Jersey and the Isle of Man. Ethical Consumer gave Centrica its worst rating for possible tax avoidance.
  • ExxonMobil, with £72m investment from councils. The company operates five subsidiaries out of Bermuda and in 2012 reportedly had $43bn in profits sent offshore from the US.
  • EOG Resources (a fracking company) with £40.7m investment from councils. In 2013, taxpayer.net reported [pdf, p21] that EOG “deferred $2.3bn of its taxes, bringing its current… tax rate down to 7.4%”. Its estimated tax rate that year should have been 33.8% [pdf, p7].

There is no suggestion that any of these companies or councils have acted illegally. But councils have invested over half a billion pounds of public money in these companies which use offshore tax schemes. And that figure doesn’t include the undisclosed amount councils have invested in Chevron, which operates 264 subsidiaries out of the tax haven Bermuda alone. Nor does it include the numerous other companies listed in the report.

Councils: a sick irony

It is concerning that councils are investing so heavily in fossil fuel companies. But it’s also damning that they will happily funnel public funds into some of the most notorious tax avoiders on the planet.

Read on...

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There’s a sick irony that, while public services are being cut back, our money is funding companies that avoid tax. This is money which could be going into things like the NHS and education; services that the councils, which ferreted our money to offshore companies, provide. This practice by councils of all political shades needs to come to an end. And quickly.

This article was updated at 6pm on Wednesday 15 November to clarify that around half a billion pounds of public money is invested in companies that use offshore tax arrangements.

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