Tag Archives: tax dodging

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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Famine, climate change and the BBC

I must protest about the BBC’s portrayal of the impending famine in Ethiopia on the 10 o’clock news on Monday night as being down to ‘God’ and ‘Mother Nature’. Not that I feel I need to defend God. But laying the blame on a rather abstract third party neatly avoids the issue of climate change. The failed rains in Ethiopia are part of a pattern of increasing frequency and severity of droughts in the regions, driven by increasing global temperatures and more severe and unpredictable weather.

You see, if God is to blame, we don’t have to worry about climate change yet. We can ignore the fact it is actually happening now, not in the future, and that its severest impacts are felt by the most vulnerable in the world.

Better still, we can ignore our own responsibility. We are absolved of blame. We don’t have to consider that our carbon output, caused by our rich, comfortable lifestyle, is leading to starvation and death in other places. We don’t need to regret the woeful progress that has been made by our leaders in agreeing ways to limit carbon emissions and help those already suffering the effects. We don’t have to change the way we live, or challenge climate change deniers, or press leaders for proper actions. Plans to change to a green energy supplier can be put off for now, and we will give up flying, but after we’ve been to visit family in California.

In fact, if we give a bit of money, then we’ve done more than could possibly be expected of us. After all, hasn’t Ethiopia been here before? Surely their government has learnt how to manage famine by now? Has nothing changed since ‘Live Aid’?

Well, let me tell you, nothing has really changed. Global markets are still skewed towards the richer nations of the world. More money still flows out of Africa in profits and lost taxes and debt repayments than has ever gone the other way in terms of aid. We’re still talking about global warming but doing nothing about it. We still allow multi-national corporations to avoid tax and hide profits because it suits us not to upset them. And when countries do sit down to talk, as they will in Paris at the end of this month, corporate interests will still influence proceedings and the global South will struggle to get their voice heard amidst the hundreds of professional lobbyists the rich will bring.

IMG_0691So let’s have no more talk about Mother Nature causing famine in Ethiopia and take
responsibility for the climate, for our sisters and brothers who are suffering, and our elected representatives who need to act. The News even had an item later on the programme about climate change but failed to join the dots. Don’t make the same mistake. Start by joining events to call for climate justice as the talks in Paris begin. Here’s the one in Sheffield, there’s one in London, one in Edinburgh, or find one near you!

The Queen’s Speech

P1000347It’s been just over 3 weeks since that most shocking of election results. It wasn’t so much that Labour, the party I was supporting, lost, but the consequences of that loss. No repeal of the bedroom tax, another assault on those with the least with a reported £12bn cut to benefits, creeping privatisation of the NHS, no lifting of the gag on charities to “speak truth to power” while private lobbyists and big business continue to wield undue influence. I felt sick, and then I felt angry, and then I realised that I needed to harness that energy, join with others, and do what I could to challenge inequality and help those most in need. So it was great to find 100 people at the constituency Labour party meeting two weeks later, all feeling the same thing

What happens now? I reckon we need to be active on two fronts. Firstly, people are in genuine need. Current policy is making life tough for many, and there are equally many ways we can get involved to help. What is going on in your community that you can join in with to help those in need? We had Baby Basics in church this morning, talking about how they provide clothes, nappies and toiletries for vulnerable new mums and babies who have nothing – asylum seekers, teenage mums, those fleeing domestic violence. And anyone in Sheffield can sign up as a Fairness Champion, to commit to tackling inequality across this city. I’m sure you can find examples where you live.

But equally, we need to challenge injustice where we find it in the legislation that will be put before us over the next parliament. Like a stuck record, I keep saying that we can support food banks, but we must continue to denounce the fact that food banks even need to exist in 21st century Britain. So I thought it would be worth looking at the Queen’s Speech, to see what a Tory-only government looks like. As I see it, what are the challenges that lie ahead, the challenges to justice and equality?

The speech starts well, promising to “help working people get on”, and “new opportunities to the most disadvantaged”, and to “provide economic stability and security at every stage of life.” I think we’ll be coming back to these promises later on. I’m really keen to get beyond the sound bites and look the legislation that is actually being proposed.

Take, for example, the legislation put forward “to help achieve full employment and provide people with the security of a job”. This refers to the “full employment and welfare benefits bill”. The main purpose of this bill is to lower the benefit cap (the total a non-working family can receive in benefits) from £26,000 to £23,000 a year and to freeze most working-age benefits for two years. Not so much of the opportunities for the most disadvantaged there, then. Instead, an arbitrary cap on income for many whose expenditure will continue to rise. Support for young people will also become much more difficult to access.

The government’s attitude to welfare seems to be unchanged. Despite the fact that by far the biggest spending on welfare goes on pensions, the speech promises to “secure the real value of the basic state pension”. Not that I want to knock pensioners, but it is funny how welfare reform never quite reaches this far. Meanwhile, that other huge chunk of welfare spending, housing benefits, is not mentioned at all, except that it will be included in the benefit cap above. No plans to tackle exorbitant rents, poor housing or exploitative landlords. Instead, the government offers housing association tenants the right-to-buy their homes. The fact that the government doesn’t own these assets which it seems so determined to sell doesn’t seem to matter. This is the government’s answer to the housing crisis, despite the fact that under previous schemes, newly built replacement housing doesn’t keep pace with the number of houses sold. And we’re still not getting anywhere near “new opportunities to the most disadvantaged”, who wouldn’t be able to afford to buy their homes anyway.

The plan that people working 30 hours a week on the national minimum wage would not pay income tax is a good one. It does seem ludicrous that a minimum wage is set which is then subject to income tax. This will be done by raising the income tax threshold. Now, here comes the science. Raising the income tax threshold does not help the poorest and most disadvantaged people in our society. They are already not paying tax! But it does help everyone else – including those who are already well-off or rich, because they end up paying less taxes too. I’m not saying we shouldn’t do it, I’m just saying it’s not a measure to help those who are really poor.

There’s a lot of reading between the lines to be done, as far as I’m concerned. Take the promise of providing 30 hours of free childcare for 3 and 4 year olds. This is clearly linked to working 30 hours on the minimum wage above. But providing 30 hours of childcare doesn’t mean you can work for 30 hours, unless we are expecting 3 and 4 year olds to take themselves to nursery? And another thing! This isn’t free child care! It is places in nursery schools. Since when was nursery simply free child care? I’m not sure what the fully-qualified, Ofsted-inspected nursery teachers will make of that. Credit to my friend’s blog for pointing this out.

make tax fairPresumably, this is going to cost money, which apparently we don’t have, and it’s unclear where we’re going to find it, as the Queen’s Speech also promises “no rises in income tax rates, value-added tax or national insurance for the next five years”. Nor does it offer any measures to tackle tax dodging, despite this being a manifesto promise.

“Securing the future of the NHS” is another empty promise unless it is accompanied by some funds. I agree that access to GPs and mental healthcare needs to be improved. I also know people who work in both these services who are working way beyond their contracted hours, in difficult and sometimes dangerous circumstances. To genuinely attempt to get this right will require money, time, patience and proper consultation with those at the sharp end. I particularly like the comment on Have I Got News For You that increasing the number of GPs may be incompatible with reducing immigration!

But we really see Cameron following in Thatcher’s footsteps with his plans to “reform trade unions”. This amounts to making conditions for a strike ballot far tougher than those any elected government has ever needed to reach. Conditions which the TUC predicts will make it almost illegal to strike. Nice to see what it really means to help working people get on, by removing their right to withhold their labour, while low-pay, zero-hours contracts and other exploitative working practices continue unchecked.

The government will continue with its plan to expand academies and free schools, despite the lack of evidence that free schools in particular actually do better in the long term. Despite appearing to bring control of education closer to communities, in effect it actually centralises it, taking schools away from local authorities and bringing them under central government authority. I’ll leave you to decide if this is good or bad.

I read the Queen’s Speech with a profound sense of disappointment at how small Great Britain seems to have become. So much of what is proposed focuses only inwards, and the outward looking legislation is diminishing. Our relationship with the EU is to be renegotiated, and then we will decide whether to stand with our European neighbours or to stand apart. Although he backed off from proposing legislation, Cameron still insists on a discussion about whether we continue to hold ourselves accountable to others on the issue of rights, or whether we will decide to be accountable only to ourselves. The plan to “modernise the law on communications data” is a revival of the micro-managing snooper’s charter. I’d like to see “extremism” better defined before we get to the legislation. Disagreeing with governments is healthy, spying on your citizens is not.

It’s good to see climate change getting a look in. The government pledges “effective global collaboration…to combat climate change, including at the climate change conference in Paris later this year”. I’m also pleased to see measures to increase energy security. It would be good if this included more investment in renewable energy and an end to fossil fuel subsidies, so we can be liberated from our dependence on gas, coal and oil. Fracking is not the answer.

I hope we can lead the way to effective action on climate change, and I hope we can “continue to play a leading role in global affairs”. But the rhetoric on Europe alongside our abdication of responsibility for the refugee crisis in the Med means Great Britain is starting to look very small indeed.

Make It Fair – time to tackle Tax Dodging

make tax fairWell, we’ve come a long way. Tax is making great progress along its pathway of rehabilitation back into society. To be sure, austerity has focused our minds. Now we’re really missing all those lovely things our taxes used to pay for (teachers, nurses, gritters, libraries, Sure Start centres) we’re severely unimpressed when some people and businesses don’t pay their fair share.

Conservative estimates (with a small c despite it being at the beginning of a sentence) reckon that the UK loses £35bn a year due to tax dodging. That should be enough to fix all the potholes in Sheffield’s roads and still have a bit left over for a few extra teachers and nurses. But it’s not just the UK. A few weeks ago, I was listening to Suzanne Matale from Zambia talking about the massive flow of money out of her country from tax dodging multi-national businesses. More than three times as much money leaves Africa for the rich west as is received in via international aid. Just think how many teachers, nurses and roads that would cover.

While we’re thinking, let’s reflect on why it has taken us so long to keep our promise to give 0.7% of our country’s income in overseas aid. It’s a great landmark to have reached, but why do we begrudge giving such a tiny proportion when so much more money is moving the other way? It seems so simple – if we could crack down on tax avoiders, in the long run, countries like Zambia would have plenty money to fund education, healthcare and road building, and eventually international support would no longer be needed.

But tax isn’t simple, as anyone who has wrestled with self-assessment, or even a tax credit application form will know. A lot of the time, businesses aren’t technically breaking the law. Some would say businesses have a duty to their shareholders to carry out effective “tax planning” (nice euphemism). We’ve even heard a member of the House of Lords declare that “everyone is doing it”.

So we need to take a different view. Our personal taxes are part of our contribution as citizens and solidarity with each other to build up the common good. It’s the same for businesses. It’s no longer enough to say that a business is beholden to its shareholders. It also must take care of its workers and other members of the community where it chooses to operate. It’s not acceptable for a corporation to extract all the copper from Zambia’s soil without paying its fair share of taxes to the benefit of the Zambian people. After all, where would business be without healthy, educated workers able to rely on the physical infrastructure of a country kept safe by a well functioning democracy and rule of law?

That’s the moral argument for paying tax. But it’s pretty hard challenging practice that isn’t illegal. This is where the Tax Dodging Bill comes in. A coalition of charities, including Christian Aid, Action Aid, Oxfam and Church Action on Poverty, is calling for a new bill to close some of these scandalous tax loopholes and for the additional revenue generated to be spent on tackling poverty. Most of this kind of tax dodging is possible because companies operate in a number of countries with different tax rates and laws. So vast companies like Google, Starbucks and Amazon (and even lovely homegrown Boots) can get away with paying next to nothing in tax in the UK, while smaller companies only based here pay the full amount. This is hardly fair for businesses trying to compete, nor is it fair for the rest of us missing out on essential services which lost revenue can’t pay for.

Campaigners against tax dodging are calling for the newly elected government to introduce a bill within 100 days of coming to power, which would help tackle poverty in developing countries and to use the funds raised here to tackle poverty in our society. The Tax Dodging Bill addresses foreign multinational businesses trading in the UK. It would make it harder for these companies to dodge UK taxes by ensuring they can’t use tax havens to hide profits. The bill also calls for a rigorous review of tax breaks to ensure that any which remain are truly beneficial to the UK economy, society or environment. UK tax rules should not encourage UK companies operating overseas to avoid tax in developing countries, so the bill calls for the rules to be reviewed in this light. Campaigners also want to the bill to call for more transparency in the UK tax regime, including country-by-country reporting of tax and profit data, and tougher sanctions on tax avoiders and those who provide tax avoiding advice. Finally, the campaign is calling for political parties to commit to using the funds raised in the UK to tackle poverty here.

With the election just weeks away, and no-one ahead in the polls, all parties are still creating their final messages to appeal to voters. Right now, we the people have power and influence! If you’re fed up of seeing the big boys getting away with it, join the campaign. You can email all your local parliamentary candidates about tax and sign the Tax Dodging Bill petition.

Enough is enough. Tax dodging lines the pockets of the already wealthy while robbing the poor by diverting funds away from government services. Not everyone is doing it. The richer you are, the easier it is to pay less. That’s why we need a Tax Dodging Bill now. Let’s hear it for tax collectors – we’ve come a long way from Zacchaeus and the Beatles!