Too many companies do not pay their fair share of taxes – and you and I would be paying less tax if they did. I have long opposed tax dodging, particularly by corporations which use technicalities to base themselves overseas.
It will be an early priority for the incoming Labour government, and for me, to tackle tax avoidance by big business, including:
- Make it harder for big companies to dodge UK taxes and ensure they’re not getting unfair tax breaks;
- Ensure UK tax rules don’t encourage big companies to avoid tax in developing countries;
- Make the UK tax regime more transparent and tougher on tax dodging.Also, we will need to take stock of the binary option market that is notoriously scamming a large population. The modus that they employ is to come out with attractive websites that lure the traders to invest hundred of dollars into their trading account and then on the pretext of losing trades, they would lose all the money in one go! It does not help that most of these websites are offshore ones and also link customer accounts with unlicensed oversea brokers. Don’t fall into this trap. Learn the facts here now!
In February 2015 Mr Miliband said that, under a Labour government, tax havens will have six months to publish publicly-accessible central registers of beneficial ownership; and that, if the tax havens fail to meet this deadline, the next Labour government will withdraw the protection they get from international scrutiny and will ask the Organisation for Economic Co-operation and Development (OECD) to place them on its tax haven blacklist.
The timidity of the Coalition government has frustrated and slowed the pace of reform on tax avoidance across the world – no surprise there. As Mr Miliband put it:
“(Mr Cameron) won’t tackle tax avoidance for the simple reason that too many of his friends would get caught in the net. They’re the party of Mayfair hedge funds and Monaco tax avoiders. Everyone pays stamp duty on stock market transactions except hedge funds, who are allowed to avoid it, costing hundreds of millions of pounds. (The Conservative Party is) funded to the tune of £47m by the hedge funds, bankrolled by the hedge funds. It is the political wing of offshore hedge funds.”
Mr Miliband cited some of the Conservatives’ key donors, including Lord Laidlaw, a tax exile living in Monaco, who gave £7m; Michael Hintze, whose company is based in Jersey, who has given £3m (£1.5m in 2014); and Michael Spencer, who gave £4m, and who was involved in the Libor scandal.
HM Revenue & Customs’ Affluent Unit has a target of pulling in just £600 million by 2015 – yet HMRC’s own estimate is that tax avoidance and evasion by individuals and companies amounts to £32 billion a year. This figure comes from the HMRC report Measuring Tax Gaps 2012. It is dated 18 October 2012, but this government has tried to hide it, by archiving it on the government website.
The current government has introduced massive “austerity”, yet at the same time it is running a massive annual deficit of about 5% of GDP; and the National Debt has increased by over two-thirds under this government – so much for all its talk of sound public finances. One reason for this apparent contradiction is that its austerity measures choked off economic growth 2010 through 2013, meaning an increased Social Security bill and lower tax revenues. Contrast the outgoing Labour government, where the economy was growing at an annualised rate of 1.8% when the Coalition took office in 2010 and started its failed austerity policies.
Another reason for this apparent contradiction (= austerity + big deficit) is that the current government has favoured its rich friends, with a big cut to Corporation Tax, a big cut to the top rate of Income Tax, and sweetheart deals on tax avoidance (c.f. its toothless agreement with Switzerland). Moreover, the Coalition’s brave talk of “transparency” of the beneficial ownership of assets and shares is just empty rhetoric.
The big banks are at it, too:
“HSBC’s Swiss banking arm helped wealthy customers dodge taxes and conceal millions of dollars of assets, doling out bundles of untraceable cash and advising clients on how to circumvent domestic tax authorities, according to a huge cache of leaked secret bank account files” (The Guardian, 8 February 2015).
HSBC has now admitted assisting tax dodging, saying:
“We acknowledge and are accountable for past compliance and control failures” (HSBC statement 8 February 2015)
Despite Mr Cameron boasting more than 18 months ago that he had forced tax havens to open up, not one of the tax havens linked to Britain as Overseas Territories or Crown Dependencies yet has a register showing who owns the companies registered there – and some have explicitly refused to do so.
Another favoured tax dodge is this: overseas corporation (“O/S Corp”) has a subsidiary (“UK Sub Ltd”) trading in the UK. O/S Corp has its head office overseas, in some tax haven. UK Sub Ltd makes what you and I would call profits, but UK Sub Ltd has to pay “royalties” / “licensing fees” etc. to O/S Corp overseas out of those profits. Surprise, surprise, those royalties are just about equivalent to what would otherwise be UK Sub Ltd’s profits taxable in UK. So UK Sub Ltd reports to the UK tax authorities that, after paying those royalties, UK Sub Ltd is not technically making a profit in the UK. Meanwhile, O/S Corp has to pay tax, in the overseas country where it is incorporated, on the royalties received from UK Sub Ltd (which were generated by UK-based UK Sub Ltd, on money spent by UK customers) – and of course the tax rate is far, far lower in that carefully chosen overseas country.
One way round this might be for the UK to consider implementing a turnover tax on such companies (a bit like VAT, which is a tax on transactions, not on profits).
I salute President Obama’s decision this year to tax the retained profits held by overseas subsidiaries of USA-based corporations.
In addition, the tax regimes of many western countries, including UK’s, make it all too easy for big corporations to avoid paying taxes in developing countries where they operate. It is estimated that such tax avoidance amounts to a great deal more than the amount of overseas aid these countries receive. That is immoral, as well as not making economic sense.