Tuesday, 30 December 2014

Tax avoidance: a reason to stay in the EU

Labour`s vague promises on closing a few tax "loopholes" and collecting an extra few hundred million, have not proved themselves vote-winners, but all is not necessarily lost; there is still time for policies to be improved.
       Does anyone really believe this Tory-led government really wants to get rid of the scourge of tax avoidance, which Margaret Hodge has described as now being an "industry" in this country. A recent poll surprised us, not with its findings that only one in five of the electorate believes political parties have done enough to ensure companies and rich individuals  pay their fair share, but that 20% of voters actually think sufficient is being done! It`s difficult to see where there is any evidence to suggest the government is serious in its intent, despite the rhetoric about avoidance being "morally repugnant", and that all tax avoiding companies like Amazon and Starbucks would soon be "smelling the coffee".
        In fact, there is plenty of evidence supporting the opposite thesis, that this government has never taken the subject seriously, despite Osborne`s announcement about a so-called "Google tax", which is designed to be benefitting the Treasury by only £355m a year by 2019, barely denting the current "tax gap" of at least £35bn. The most obvious evidence is the fact that thousands of jobs have been cut, with more to come should disaster befall us and the Tories form a government next May, at HMRC. How can it possibly make sense to reduce the number of tax inspectors when supposedly trying to collect more tax?  No logic either in allowing the government`s tax agency to make "sweetheart deals" with companies like Vodaphone and Starbucks, excusing them from billions owed in tax bills. Similarly, Cameron and Osborne can hardly complain about the creation of "aggressive tax structures"  as have recently been uncovered in Luxembourg, by the "big four" group of accounting firms when their government uses advice from those same firms for tax policy. Such advice led to the adoption of the "patent box" device to encourage firms to invest in Britain, as opposed to other EU countries, because this particular scam could see firms paying as little as 5% in corporation tax on their vast profits. Interestingly, Osborne has been forced to amend this recently because of German opposition. Quite clearly, countries in the EU are getting fed up with what John Cridland, the director-general of Britain`s business organisation the CBI, called Britain "going it alone", at a time when the finance ministers of Germany, France and Italy are stressing that the "lack of tax harmonisation is one of the main causes allowing aggressive tax planning". In other words, until all countries in the EU work together, their Treasuries will continue to be deprived of billions.
     This need for co-operation did not deter the coalition government from relaxing the so-called "controlled foreign companies" laws, another scam for the world`s unprincipled companies to exploit, or from its recent announcement in the autumn statement that Northern Ireland would be allowed to set its own level of corporation tax, presumably as low as 12.5% to match that of the Republic. After all, who cares about  "tax harmonisation" when support from Unionists might be needed in May for another Tory coalition? Even if this obviously provocative action by Osborne is not deemed illegal regional aid, as tax expert Richard Murphy believes, does the government expect other EU countries to sit back and watch quietly as businesses up sticks and move their headquarters to Belfast?  Relations with the US have hardly improved with the government`s reduction of corporation tax rates to 21%, fully 18 points lower than those in the States, leading to senators threatening legislation preventing take-overs of foreign companies for tax reasons, the so-called tax "inversion" deals.
    So what should a Labour party, with hopes of forming a government in six months time, be advocating? Supporting "tax harmonisation" might be a good start, as clearly the huge variation in Europe`s corporate tax levels invites trouble from the "big four" and their clients. Only when all EU members co-operate fully, agree tactics, and avoid "advice" from the "big four" accounting firms, will tax avoidance be reduced.Then there`s the possibility of a Business Rate Supplement, for tax avoiding companies, as well as the adoption of the Fair Tax Mark as a government award for firms actually managing to pay the correct amount, and a firm commitment that any tax avoiding individual, or boss/director/CEO/ of any tax avoiding business will return all Honours, and be in receipt of none in the future.
   By stressing such specific proposals, Labour would at least be demonstrating to the electorate not only that they are serious in their intent to reduce the "tax gap", but that they really are different from the other parties. Forcing individuals and corporations to pay up would mean policies would change, and reasons for austerity disappear, something the voters are desperate to hear.


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