We'll hunt down the tax avoiders

The Guardian has exposed individuals who abuse the system. The government is taking action to crack down on these practices 

The Guardian, Vince Cable, Friday 14 December 2012

Sark, the Channel island where, during the 1980s, many companies were
registered for tax purposes. Photograph: Martin Argles for the Guardian

Tax avoidance, sham directors, money laundering: the recent Guardian investigation made sobering reading. In the UK we are proud that it is easier and cheaper to set up a company here than just about anywhere in the world. This flexibility is hugely valued by the start-ups and small companies which create a significant proportion of our wealth and jobs, and which are vital to recovery from the latest recession. But this flexibility provides a challenge: how do we stop our system from being abused by people who want to use it to dodge tax or to launder the proceeds of crime?

This is not a new problem. From the Sark-larkers of the 1980s, who briefly made a small island in the English Channel into an (apparent) global centre of company formation, to the issues highlighted by the Guardian, the UK has always been confronted with individuals seeking to play the system. British company law and corporate governance is, in general, globally respected, and the vast majority abide by the rules. That is why we must identify and stop the minority who sail too close to the wind in order to protect the UK's reputation as a trusted place to do business.

Becoming a company director carries with it legal responsibilities which, if breached, can result in disqualification, fines and prison. Some people think that putting up a straw man as a director makes them immune from the consequences. This is not the case: if you are acting as a director, you are liable.

The government takes breaches of the law seriously. Last year we disqualified more than 1,100 directors, including people who were not formally registered or appointed as directors and shadow directors. We also wound up 355 companies in the public interest and pursued many others for tax evasion and other offences. We are investigating the allegations against the individuals and companies made by the Guardian and Panorama and, where there is a strong legal case, we will take action. We are also reviewing our legal and enforcement priorities to ensure that we are focusing resources on the most serious abuses. Concerns have been raised about the potential abuse of arrangements for hidden ownership, and I am attracted to the idea of increasing transparency to prevent the concealment of corporate control. Where there is flagrant abuse of corporate entities, we will seek to tackle it.

Many of the more sophisticated schemes cross international boundaries, looking to use weaknesses in local laws or international co-operation to hide activities and assets from national law enforcement and tax authorities. We must build on the emerging network of intergovernmental co-operation to counter tax evasion and avoidance, and have recently signed an enhanced tax information exchange agreement with the US. We are looking to do the same with other jurisdictions.

We need to drive forward global improvements to transparency to tackle corruption and drive prosperity and growth for all, and we are determined to lead international action in this area. In the developed world, we should put our own house in order – and thereby help developing countries to prosper too.

The UK has also been working to ensure that the EU sets a new global standard for transparency in the extractives industry. Tough new rules on reporting are designed to ensure that citizens of developing countries can hold their governments to account over how payments from oil, mining and gas companies are spent. This will help ensure that the sale of natural resources benefits the many, not the few.

The message we need to send is simple: there should be no hiding place for the proceeds of crime, corruption and tax dodging.

Vince Cable is secretary of state for business, innovation and skills

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