After the United States and its allies promised to squeeze more tax out of large profitable multinational companies, Britain’s exotic “Treasure Island” tax haven network may face the biggest threat in half a century.

From cash-rich Chinese officials to Russian oligarchs to Western companies to hedge funds seeking tax cuts or complete secrecy, the usually remote islands of the former British Empire have always been everyone’s primary jurisdiction.

But a tax agreement reached by the finance ministers of the Group of Seven (G7) in a 19th-century mansion near Buckingham Palace could hit Britain’s Treasure Island severely after major economies have avoided trying to recover income for decades.

“This is a turning point,” said Alex Cobham, CEO of the Tax Justice Network, an advocacy group against tax avoidance. “We will look back in 5 or 10 years and say:’Yes, that’s when it changes.'”

Cobham said: “There is a narrative shift-this active commitment to end the race to the bottom,” although he admits that the specifics may still be poorly drafted, and that politicians have promised to fight for years.

According to estimates by the Tax Judicial Network, due to corporate and individual tax evasion, the world loses US$427 billion annually. Approximately US$245 billion was lost to multinational companies transferring profits to tax havens, and another US$182 billion was lost to wealthy people who withdrew a large number of assets.

If the details promised by the G7 become an enforceable reality, since the collapse of the British Empire in the 20th century, the global flow of hidden profits may be redirected in one of the most fundamental ways.

With the collapse of British power, some of its territories became autonomous territories. These territories were not part of the United Kingdom, but were bound by the British Defense Agreement and maintained close ties with London.

Some of these 14 British Overseas Territories – including Bermuda, the British Virgin Islands (BVI), the Cayman Islands, Gibraltar and the Turks and Caicos Islands – began to live on beach tourism and exotic finance as taxpayers Less.

Competitor network

According to data from the Tax Justice Network, the UK tax havens accounted for 29% of the US$245 billion in taxes lost by global companies. The network listed the British Virgin Islands, the Cayman Islands and Bermuda as the world’s top three promoters of corporate tax abuse.

The Ministry of Finance of the British Virgin Islands, Cayman Islands and Bermuda did not immediately respond to requests for comment.

Cobham said the British islands that are hit hardest by the imminent changes in corporate profits face a liquidation that will destroy the business model they have relied on for decades and could lead to high unemployment.

Essentially, two competing and intertwined networks of tax havens are formed: a British grid and a more continental-style network, including Ireland, Cyprus, Luxembourg, Malta, the Netherlands, and Switzerland.

The G7 tax agreement will greatly reduce the attractiveness of corporate tax havens because it gives countries the right to impose additional taxes on corporate profits in countries with tax rates lower than the world’s lowest tax rate.

Richard Murphy, a chartered accountant and visiting professor of accounting at the University of Sheffield School of Management, said: “Those who have traditionally served the personal market — if you like it, the palm tree market — they basically get away.” school.

“It is the locations of large companies like Luxembourg, Ireland and the Netherlands that will really be hit here,” he said.

The worst-hit countries are expected to lobby hard to retain as many tax incentives as possible. Murphy said that key accounting definitions such as “profit” and “tax paid” still need to be defined.

Although Murphy believes that it will have less impact on many traditional British tax havens, he said that the most important aspect of the final G7 Communiqué is that it sends a signal to the corporate world: “Clean up your behavior.”

He said this will be a particular concern because many Western boards face shareholders who demand improvements in the environment, society, and corporate governance.

“For the business community, this sends a very big message, that is,’Avoid these places-you may run into trouble’, and some of these places do run into trouble,” he said.

“Technology will obviously be hit, but financial services will also be hit hard,” Murphy said. “Both the banking and financial industries are leading in this regard, and some pharmaceutical companies may also be the same.”