Tax havens and the wealthy

tax-haven-protestDid you see the desert island appear in Trafalgar Square last Thursday? Christian Aid, Oxfam and Action Aid all came together to create a sandy tax haven to highlight the issue of tax dodging while David Cameron was hosting world leaders at his anti-corruption summit.

By hiding profits, obscuring who owns what and disguising where business is actually carried out, big business and rich individuals can avoid paying the tax that is due, and cream off billions of pounds of what is rightfully public money. And if you think the British economy could do with a bit more money to spend on elderly care, schools and hospitals, just think what that money could do in Zambia or Haiti.

What campaigners would really like to see is a public register of the real people behind company names. Company names are often just shell names for the real interests behind them, and there can be many layers, but finding out who really benefits from the money a company makes (the ‘beneficial ownership’) would shine a light into the dark places where money is hiding. A few countries (including the UK) have agreed to publish a public register of beneficial ownership. But others have only agreed to make this information available to those with a ‘legitimate need’ ie tax enforcers. Good, but not as good as full accountability to civil society. Crucially, those digging their heels in are the British Overseas Territories. Cameron could insist on a public register, but he has not. We must mark this down as ‘Could do better’.

Cameron did manage something though. Foreign companies of property in the UK will have to declare these assets and make transparent who is the ultimate owner, or beneficiary. This is particularly relevant for many hugely expensive properties in London, and has caused quite a stir. Apparently these wealthy owners would prefer to be anonymous and this rule change would make them sell-up. This is being presented as a ‘bad thing’. But as far as I can tell, super-rich foreign investors have caused London property prices to be so hugely inflated that getting rid of them would be a good thing. For more on this, try this article by Giles Fraser, a bit old now but the issues haven’t changed much.

Critics of the public register say it will drive ‘wealth creators’ away, and it was this phrase that finally drove me to my keyboard. It’s one of those phrases that appears everywhere in defence of tax cuts for the rich and austerity for the rest of us. But it’s a phrase that is carefully designed to pull the wool over our eyes. For who in this country truly creates wealth? Those who make things or build things, those who create, those who make something of value from raw materials or their own creative talents. In other words, working people. The rich do not create wealth, they mainly inherit it, and then hide it in an off-shore bank account. Or they become rich on the back of the workers who have created and enabled them to build their fortune.

Rich people don’t boost the economy. Their money is largely static, invested in buildings, or in a complicated tax-free arrangement. But put money in the hands of ordinary people, and they will spend it, on goods and services, on holidays, on food, on the essentials as well as on leisure.

I’ll be glad if so-called wealth creators are driven away. Then we might be able to restore some sanity to the housing market and leave space for the rest of us to truly create a society where the wealth can be spent and shared more fairly.

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