David Cameron warns overseas territories on tax

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Cayman Islands
Image caption,
Territories like the Cayman Islands have a reputation for low taxes and light touch regulation

Prime Minister David Cameron has urged British overseas territories to "get their house in order" and sign up to international treaties on tax.

He wrote to 10 territories and crown dependencies, including the Cayman Islands and the Isle of Man, which operate low-tax regimes.

Critics claim such places are used by companies for tax avoidance or evasion.

The plea came ahead of a G8 summit in June, when the UK is expected to push for tighter tax measures.

"With one month to go, this is the crucial moment to get our own houses in order," Mr Cameron wrote in the letter.

"I respect your right to be lower tax jurisdictions... but lower taxes are only sustainable if what is owed is actually paid."

'Complex arrangements

The 10 territories that received the letter are Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Anguilla, Montserrat, the Turks and Caicos Islands, Jersey, Guernsey and the Isle of Man.

Some have been described by the UK government as having "complex tax arrangements".

Low taxes and light touch regulation have seen some of them become major centres for international business.

But the lack of transparency in their banking systems has left them open to accusations that they are being used to avoid paying taxes.

Mr Cameron urged them to sign international protocols designed to allow tax information to be shared more easily between countries, and also to take measures to improve their own transparency.

"Put simply, that means we need to know who really owns and controls each and every company," he said.

Tax avoidance, where companies operate within the rules to avoid paying taxes, and tax evasion, which is outside the law, have risen high on the political agenda in recent months.

High-profile companies like Google, Amazon and Starbucks have faced criticism in the UK for the low levels of tax they appear to pay compared with the size of their businesses.

On Sunday, Google's executive chairman Eric Schmidt defended the company's tax affairs.

He said the search engine giant "has always aspired to do the right thing", but added that "international tax law could almost certainly benefit from reform".

Writing in the Observer, he said he wanted "to move the debate forward".