One small step for a few island territories could mark a giant leap forward in corporate tax accountability. For years, certain islands represented more than fun in the sun for vacationers: for companies in the know, they were synonymous with tax shelters.
Now, on the wave of a global crackdown on tax evasion, Britain's ten crown dependencies and overseas territories - including financial hubs such as the Cayman Islands, Bermuda and Jersey - will sign an international convention to lay that reputation to rest. The agreement, dubbed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, aims to help combat tax evasion, U.K. Prime Minister David Cameron said Saturday.
Just days before the G-8 summit in Northern Ireland, the territories' leaders agreed to sign the convention, joining more than 50 nations who have already signed off. The crown dependencies and overseas territories include the Cayman Islands, Bermuda, British Virgin Islands, Gibraltar, Anguilla, Montserrat, Turks and Caicos Islands, Jersey, Guernsey and the Isle of Man.
Their leaders also agreed to produce action plans on offering information about "beneficial ownership:" who owns which corporations and who benefits from that ownership. Historically, the territories held that information closely, which encouraged a culture of corporate cover-up.
The prime minister wrote the crown dependencies and territories in May and urging them to "knock down the walls of company secrecy." He said that while he respected their right to be lower-tax jurisdictions, low taxes could only be sustained if businesses pay what is owed and international rules are fairly enforced to level the playing field internationally.
In a joint statement, the respective leaders expressed their commitment to "a responsible and effectively regulated global business environment and ... tackling the global problem of tax evasion."