EU losing €8 billion to UK tax haven empire

The UK’s empire of tax havens has dominated the Corporate Tax Haven Index again, a ranking of places most complicit in helping multinational corporations underpay tax in other countries.¹

For the first time, the tax harm of the UK’s “second empire” to each EU country is revealed as the UK and EU signal a possible rapprochement after Brexit. Altogether, EU countries are losing €8 billion to the UK second empire, with France and Germany losing the most.

With the UK itself being one of the world’s biggest losers to tax abuse by multinational corporations, the best path for the UK and EU to limit regulatory risk to tax abuse and to step out of a race to the bottom on corporate tax is the UN’s plans to flip the world’s global tax system from a lose-lose to a win-win basis, the Tax Justice Network advises.

Four British tax havens rank in the top 10 of the Corporate Tax Haven Index – which was updated today – with the British Virgin Islands, Cayman, Bermuda and Jersey ranked in 1st, 2nd, 3rd and 8th respectively. Two more British tax havens, Guernsey and the Isle of Man, rank in the top 20 with the UK in 19th. Together, the UK and its network of British tax havens are responsible for 31 per cent of the global corporate tax abuse risks identified by the Corporate Tax Haven Index.

The UK has been long criticised for the way in which its network of Crown Dependencies like Jersey and overseas territories like Cayman operates as a web of tax havens laundering and shifting money into and out of the City of London at its centre – an arrangement infamously referred to as the UK’s “second empire” or the “UK spider’s web”.

While UK officials have publicly maintained that the jurisdictions are independent, the UK has full powers to impose or veto lawmaking in these jurisdictions and the power to appoint key government officials rests with the British Crown.

Cross-referencing the Corporate Tax Haven Index against its recently launched online tracker of illicit financial flows², the Tax Justice Network has now revealed how much each EU country loses to corporate tax abuse facilitated by the UK tax haven network.

The biggest EU losers to British tax havens are:

1. France: €79 billion
2. Germany: €41 billion
3. Luxembourg: €570 million
4. Spain: €475 million
5. Poland: €438 million

Note: A full table of EU countries is available below.

However, the UK itself loses an estimated £12.8 billion a year due to multinational corporations using tax havens around the world to underpay tax in the UK.

The Tax Justice Network’s analysis also found that jurisdictions that ranked higher on the Corporate Tax Haven Index saw larger volumes of illicit financial flows crossing into their jurisdictions. A one-point increase in a jurisdiction’s cumulative score on the index corresponded to receiving 3.7% more tax abuse-related illicit financial flows.

The Corporate Tax Haven Index ranks countries on how complicit they are in helping multinational corporations underpay corporate income tax in other countries. It does this by evaluating how much wiggle room for corporate tax abuse a country’s laws and regulations provide, and by monitoring how much foreign direct investment conducted by multinational corporations enters and exits the country. This two-factor approach of assessing both laws and financial activity allows the index to rank countries on the relative risks their laws pose to others in practice and not just in theory, unlike most tax haven “blacklists”.

Today’s rolling update to the index updates two indicators on tax transparency: one on transparency of company accounts and the other on reporting of tax avoidance schemes.

The new findings show that, despite years of international efforts to tackle corporate tax abuse at the OECD, many countries still fail to require companies to disclose basic information needed to detect corporate tax abuse. The lack of significant improvement in countries’ scores is itself a tell-tale sign of the shortcomings of the OECD’s BEPS initiative and underscores the need for a robust UN tax convention. After all, governments cannot tackle corporate tax abuse they cannot see, the Tax Justice Network warns.

The findings have significant implications for the ongoing global negotiations on a world-first UN tax convention expected to be finalised next year, says the Tax Justice Network’s Index lead Moran Harari:

“The Corporate Tax Haven Index continues to demonstrate the UK’s oversized role in the landscape of global corporate tax abuse risk. The UK and EU stand to gain the most from the changes the UN tax convention aims to deliver, but they remain opposed to them. They continue to hold on to the discredited and unscientific fantasy of “tax competition” but our findings today again confirm that this only leads to a race to the bottom with no winners. The UN tax convention offers a way out of this lose-lose spiral by rebuilding the international tax system on cooperation instead of competition. The UK as G20 president and EU countries must listen to the evidence and seize the once-in-a-generation opportunity at the UN, or their people will continue to needlessly suffer the loss of billions in public money every year.”

A recent study by the global union federation Public Services International (PSI) and the Tax Justice Network concluded that countries would collect an additional US$500 billion a year in corporate tax from multinational corporations, without increasing taxes, by following through on the UN tax convention’s commitment to change where multinational corporations pay tax.⁴

The UN tax convention commitment to scrap the 100-year-old “pay-where-you-say” approach to taxing multinational corporations for a modern “pay-where-you-play” approach would see EU countries collect €57 billion more a year – enough to quadruple spending on climate adaptation in agriculture, energy and transport.⁵

Meanwhile, the UK would recover the £12.8 billion a year it loses to corporate tax abuse, enough to cover the cost-of-living measures announced at the start of Prime Minister Burnham’s premiership six times over, or more than two-thirds of the estimated cost of an NHS-style social care system championed by the Prime Minister.⁶

-ENDS-

EU countries tax losses to UK tax haven network

Visit the Corporate Tax Haven Index

Notes to editor

1. Visit the Corporate Tax Haven Index website to see the latest results. The Corporate Tax Haven Index is updated on a rolling basis in batches. Each batch include updates to a set of indicators, with the latest batch – published today – updating the index’s indicators on transparency gaps, namely ‘transparency of company accounts’ and ‘reporting of tax avoidance schemes’. This latest update sees minimal changes in countries regulations on these specific indicators, and few movements on the ranking. The update includes the latest figures on countries share of global foreign direct investment in and out of each country on the index. These figures on their own are a neutral factor. Having more or less foreign investment entering or exiting is neither good nor bad, but the bigger the investment volume, the greater the responsibility a country has to ensure its regulations do not enable cross-border tax abuse. Due to the minimal regulatory change, the few ranking movements on the ranking are mostly driven by changes in their foreign direct investment volume.
2. The Tax Justice Networks’ Illicit Financial Flows Tracker is available here.
3. A log of the indicators most recently updated on the Corporate Tax Haven Index is available here. A deep dive blog on the ‘transparency of company accounts’ indicator is available here.
4. More information on the study is available here.
5. ‘Pay-where-you-say’ vs ‘Pay-where-you-play’
   The ‘pay-where-you-say’ approach taxes multinational corporations where they declare their profits, which multinational corporations have long gamed by shifting their profits into tax havens before declaring them. In contrast, the ‘pay-where-you-play’ approach taxes multinational corporations where they genuinely do business – ie, employ workers, and make and sell goods and services. Under pay-where-you-play, the location where profit is declared on paper is irrelevant to where it gets taxed, which makes shifting profit into tax havens useless. Pay-where-you-say is primarily based on the 100-year-old “arms’ length principle” which requires governments to pretend that the local parts of a multinational corporation – its subsidiaries, headquarters and holding companies – are completely disconnected from one another and therefore ought to be taxed separately. It’s a legal fiction that pretends Apple Ireland deals and negotiates with Apple France as though they were unrelated companies, and even in competition with one another. Each country can only tax the profit made by the parts within its borders. Multinational corporations exploit this by shifting profit into their parts in tax havens to underpay tax – with over a trillion US dollars shifted offshore every year. The “pay-where-you-play” approach replaces the arm’s length principle with two components: “unitary tax” with “formulary apportionment”. Unitary tax does away with the charade and treats the multinational corporation as one entity, as a multinational corporate group made up of all its local parts. The question then is who gets to tax this unified profit? This is addressed with formulary apportionment, which allocates to each country where the multinational operates a portion of the profit to tax. The apportioning is based on a formula that takes into account things like how much of the corporation’s workforce, assets and sales are in the country – the bigger the presence of these, the bigger the portion. The calibration of the formula can have big impacts on which countries get a slice of the profit to tax and how big their slice is, hence there tends to be debate on this. Our August 2026 study models four different formulas, showing how much tax revenue each version would raise. Our headline version, on which we base the $500 billion number in this press release, gives equal weight to the location of the number of employees and the location of the sales of goods of services. This formula proves to be the most beneficial to the biggest number of countries – that is, almost all countries with the exception of a handful of tax havens and ‘HQ bias’ countries, all of whom would still benefit by increasing (or introducing) their corporate tax rates to the normal rates used by other countries. Together, unitary tax with formulary apportionment sees multinational corporations get taxed in the places where they genuinely do business. Read more about this in Prof Jayati Ghosh’s article for Project Syndicate.
6. The UK would collect 71% more from multinational corporations, bringing in an additional £12.8 billion a year. The new UK government announced in July 2026 a £2 bus fare cap, reported to cost £400 million in additional funding; business rate cuts for pubs, clubs and music venues, costing £100 million a year; and the removal of VAT from household electricity bills, which is reported to cost £850 million for 2026–27, covering the six months from 1 October 2026. We have doubled this cost to arrive at annual figure of £1.7 billion, recognising that this likely an overestimate of cost given the lower heating demands of the summer period. Altogether, these measures come to an annual cost of £2.2 billion a year. The £12.8 billion the UK would additionally bring in under ‘pay-where-you-play is 5.8 times greater.