Thursday, 14 August 2014

LabourList article on Labour and tax avoidance

The dictionary definition of "rhetoric" is "language designed to have persuasive effect, often lacking in sincerity", and we`ve certainly been inundated with bucketloads of that since the last election. Of the hundreds of examples emanating from government spokespeople, the two which are possibly most memorable are the description of tax avoidance by Osborne as "morally repugnant", and Cameron`s instruction to all tax avoiding companies, back in January 2013, after the news broke about Starbucks paying next to nothing in corporation tax, despite huge profits, that it was time for them to "wake up and smell the coffee".
   Strange then, that there seems to be little correlation between their repugnance and their supposed determination, with the "tax gap" still admitted to be £35bn a year, and reckoned by many to be possibly double that, and the job cuts still ongoing at HMRC, where so-called "efficiency savings" of £235m were made last year, with another "cull" now leading to another 2,000 job losses. Historically, each tax inspector raises for the Treasury at least two to three times his/her salary in tax, often many times more, so how can it possibly make sense for a government intent on increasing revenue, to reduce their number? The number of HMRC staff in enforcement and compliance fell by 1529  in the years 2010-12, and the trend still continues. 
      More recent news hardly inspires confidence in this Tory-dominated government`s anti-avoidance policies. When the Tory party accepted £550,000 donation from the CEO of Vitol whose company paid 2.6% global tax on profits of £846m, the cat was very plainly out of the bag, compounded by Cameron`s appointment of the ex-head of tax avoiding Google`s European division to the House of Lords. The internet company famously paid £11.6m to the Treasury in 2012, despite generating £3.4bn of business in Britain.
      Tax avoidance, then, is clearly an area which Labour should be exploiting before the election, and it does have a policy which states rules will be tightened and loopholes closed, sensible but hardly headline grabbing, and certainly not likely to win over the "floating" voters, or those abandoning ship for Ukip.
     A self-funding start could be made by Labour promising to reinstate a few thousand tax inspectors, and attacking the Tories and Lib Dems for their abject failure to rid the country of what Margaret Hodge described as an "industry". Having representatives from the Big Four accounting firms on Treasury committees drawing up tax rules does not appear overtly sensible, when the same firms make many of their millions by advising businesses on their "tax efficiency"; indeed, as with the ongoing Greene King case, the accountant`s fee was 10% of the taxes successfully avoided!
     Policies with popular appeal, likely to grab attention, are not the result of rocket-science thinking, but they do require a non-avoidance guarantee from Labour leaders, MPs and election candidates. A refusal to grant government contracts to known tax-avoiding firms is a no-brainer, whilst a pledge to award no honours whatsoever, to individuals either connected to such firms in any way, or avoiding tax on a personal basis, would be a vote-winner. Indeed, legislation could be promised which prohibited such contracts and awards; if avoiding tax is not illegal, benefitting from it in these ways could become so!
    Companies which pay their fair share of corporation tax, on the other hand, could benefit from a government award, with a logo for publicity purposes, enabling the consumers to make more knowledgeable choices. FDR used a similar technique to develop "responsible capitalist" practices in 1930s America. Such an idea could then be extended to companies paying a living wage!
    It stands to reason that no-one working for the government, or indeed, representing the country in any capacity, should be allowed to do so if found to be tax-avoiding; that would involve a massive culture change that will take some time to reach fruition, but Labour have five years! The BBC may have to bring in some new presenters and programme hosts, and even reduce its number of sports pundits, new companies might have to be considered for government work, but it would be all in the national interest. No-one forces rich individuals to take accountants` advice; they know exactly why taxation has to be levied in a civilised society, and are quite willing to utilise the benefits taxation brings, like transport and security, even if choosing to exclude themselves from state education and health services. Therefore consequences have to be faced when caught depriving the nation of valuable assets.
    The country is regularly touted as the 7th richest in the world. In 2013 UK corporations were sitting on a cash mountain of £750bn cash mountain. Admittedly, tax avoidance and evasion are worldwide problems, and governments need to co-operate fully if the "industry" is to be ended, but that does not mean a government determined to limit the sum not paid into the Treasury`s coffers can make a difference. If a few feathers are ruffled along the way, so be it; if a few MPs and judges are forced into early retirement, and a few honours have to be returned, perhaps a few athletes and sportspeople no longer eligible to represent their country, so what, as long as there is extra money for the government to spend on much needed services like the NHS? As the 18th century American rebels nearly said, "No representation without taxation"!

  Culture changes do not happen overnight, and not in isolation from other major developments, especially in education, social services and the financial sector, and in this country they don`t happen at all without the backing of the government. Labour can be that government, and it can increase its chances of winning the 2015 election by reiterating the fact that tax avoidance is a crime against society, and declaring war against it.

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