UK’s unused anti-tax haven power can pay for income tax freeze

The £12 billion the UK government expects to raise across 2029 to 2031 by freezing workers’ income tax rates, as announced in yesterday’s Budget Statement 2025, could instead be raised by exercising an anti-tax cheating transparency power the UK has had since 2016 but has never used.

The transparency measure would require multinational corporations to meet the minimum level of transparency that local UK businesses are already required to adhere to. This transparency would prevent 1 in every 4 pounds currently lost to corporate tax havens each year and bring in £16 billion for the UK from 2029 to 2031.¹

The £16 billion wouldn’t just cover the £12 billion expected from the income tax freeze, but also the revenues expected from the cuts to the Motability scheme and the new per-mile levy on electric vehicles.² An additional £5 billion could be raised annually if the UK put the power to use from now.

Alex Cobham, chief executive at the Tax Justice Network, said:

“The Finance Act 2016 didn’t close the profit shifting door, but it did add a security camera so that corporations can’t use the door without the public seeing. The research shows multinational corporations use the door less often when they know they’re being watched – reducing their profit shifting by 28%, which translates into a lot of tax revenue. But the UK government is choosing to keep the camera off, even though turning it on would bring in more tax than the extended income tax freeze.”

“Faced with tightening the screws on struggling workers or making multinational corporations pay a fraction of the tab they owe, the UK government made the wrong choice.”

Faiza Shaheen, Executive Director at Tax Justice UK said:

“Every Budget is about choices, and the Chancellor chose to ask ordinary people to pay more tax, rather than multinational corporations making enormous profits or the super-rich. If the government had truly used every lever they had available, they’d have worked with the tools at their disposal to recover billions in tax revenue from corporations who’ve been able to shift their profits into tax havens.”

Australia and the EU already began this year to use the measure, known as public country by country reporting, and are expected to recover billions from multinational corporations using tax havens to underpay tax.

The UK was the first to adopt the measure in legislation as part of the Financial Act 2016 but has to date never exercised it. The UK could have raise an estimated £28 billion since 2016 to date if it had exercised the power when it was adopted.

Public country by country reporting requires multinational corporations to publicly report how much profit they make in each country they operate in. This makes it possible to track profit when a multinational corporation shifts it out of the country where the profit was made and into a tax haven. When European banks were required to publish these reports in 2014, they reduced their profit shifting activities by just over a quarter.³

Multinational corporations have been required since 2016 under an international standard to submit their country by country reports privately to governments, which then anonymise the reports before making them public.⁴ This has made it possible for academics, experts and campaigners like the Tax Justice Network to more accurately assess how much tax every country losses to multinational corporations’ tax abuse, but impossible to identify the multinational corporations behind the tax abuse.

Countries lose US$348 billion to multinational corporations using tax havens every year, with the UK losing £12.5 billion in 2021 – the most recent year for which anonymised data from the UK has been made public.⁵

If the reports collected by governments had been made public without being anonymised, countries would have avoided losing US$475 billion to corporate tax havens from 2016 to 2021, the Tax Justice Network finds.⁶

-ENDS-

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Notes to editor

1. See the estimates on how much tax the UK could recover annually here. Estimates are based on the Tax Justice Network’s research on how much tax countries can recover by implementing public country by country reporting, with extrapolation into the near future matching the period covered by the Budget Statement 2025.
2. The UK government is expected to raise £1 billion over the next five years from cuts to the Motability scheme, and raise £3 billion from a per-mile levy on electric vehicles.
3. See the Tax Justice Network’s methodology for calculating how much tax could be recovered with public by country reporting.
4. Governments started receiving detailed reports from multinational corporations – known as country by country reporting – in 2016 on where they are booking profits, exposing those booking their profits in tax havens and revealing how much they are cheating on tax by. The reports, required by an international standard introduced by the OECD in 2015 and first championed by the Tax Justice Network in 2003, were meant to be published publicly to serve as a deterrent but corporate lobbying successfully required the data to be anonymised after it is collected by governments and before it is made public. The standard barred any government from making the data public in any non-anonymised form. The anonymised version of the reports make it possible for the public to see how much corporate tax is being underpaid, but impossible to identify the multinational corporations doing the cheating, hence removing the deterrence effect of the transparency measure.
5. See the State of Tax Justice 2024 for more information.
6. See the State of Tax Justice 2025 for more information.