Think tax havens and you could be forgiven for thinking of idyllic island somewhere hot with palm trees.

But a new report out this week lays bare the real political muscle overseeing the vast financial flows to these destinations. The report, by the Tax Justice Network (TJN), finds 40% of today’s cross-border direct investments reported by the International Monetary Fund — $18-trillion in value — are being booked in just 10 countries that offer corporate tax rates of 3% or less.

The TJN report shows that if you are thinking islands, you would not be wrong because the three leading destinations for hot corporate money are the British Virgin Islands, Bermuda and the Cayman Islands.

All three are British territories. The report notes: “The UK and a handful of OECD [Organisation for Economic Co-operation and Development] countries are the jurisdictions most responsible for the breakdown of the global corporate tax system — with the United Kingdom bearing the lion’s share of responsibility through its controlled network of satellite jurisdictions.”

The UK’s corporate tax haven network is by far the world’s greatest enabler of corporate tax avoidance and has single-handedly done the most to break down the global corporate tax system, accounting for more than a third of the world’s corporate tax avoidance risks, the TJN says. “That’s four times more than the next greatest contributor of corporate tax avoidance risks, the Netherlands, which accounts for less than 7%.”

The 10 countries — British Virgin Islands, Bermuda, the Cayman Islands, the Netherlands, Switzerland, Luxembourg, Jersey (a British dependency), Singapore, the Bahamas and Hong Kong — are responsible for more than half (52%) of the world’s corporate tax avoidance risks, where the lowest corporate tax rates averaged 0.54%, the TJN says. The result is a tax war. These jurisdictions having triggered a global “race to the bottom”, which will further deplete tax revenues as countries desperate to claw back foreign investment engage in the false economy of “tax competitiveness”, the TJN says.

Although tax avoidance is often characterised as not being illegal, the TJN report differs: “This is a common misconception. Much, if not most, of what routinely gets called corporate ‘tax avoidance’ involves activity that cannot be called ‘legal’.”

TJN chief executive Alex Cobham says the hypocrisy is sickening. “A handful of the richest countries have waged a world tax war so corrosive, they’ve broken down the global corporate tax system beyond repair.”

“The UK, Netherlands, Switzerland and Luxembourg — the Axis of Avoidance — line their own pockets at the expense of crucial funding for sustainable human progress. The ability of governments across the world to tax multinational corporations in order to pay teachers’ wages, build hospitals and ensure a level playing field for local businesses has been deliberately and ruthlessly undermined.”

The TJN wants governments to use its report to evaluate their vulnerabilities to corporate tax avoidance risk to immediately identify opportunities for minimising their exposure. Ultimately it wants governments to implement a unitary tax approach to ensure full alignment of multinationals’ taxable profits with the location of their real economic activity.