Tag Archives: tax havens

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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HMRC says I’ll Take That

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I’ve found the reaction to Gary Barlow’s failed tax avoidance scheme very interesting. As I understand it, the scheme he (and a few other people too) invested in (apparently to support up-coming musicians) has been ruled not to work as a means to off-set taxes due, so the tax on earned income invested in the scheme becomes payable. He hasn’t actually done anything illegal, unless he now fails to pay his taxes, and yet there have been calls for him to return his OBE.

Have we finally reached the point where trying to find and exploit loopholes in tax laws is considered morally wrong if not illegal? Perhaps it’s the OBE that upsets us – given for raising funds for good causes which would probably have benefitted from his tax revenues. Perhaps it’s just because he’s been found out – should or would we have felt the same outrage if the tax scheme had been ruled as legitimate?

However we look at it, it seems to me that we’re not keen on the idea that someone with lots of money isn’t contributing their fair share to the welfare and benefit of all society. This runs contrary to what our Government believes – that we mustn’t tax our so-called wealth creators too hard or they will run away and take their wealth creation elsewhere.

But wealth creators only benefit society if their wealth is shared around into the economy. The theory of trickle-down economics has collapsed under the pressure of the growing gap between rich and poor since the advent of Thatcherism. Rich people’s money isn’t circulated in the economy – it is hidden away in off-shore, tax-free investments. If we want the rich to contribute to the well-being of all, it’s going to be through taxes.

We seem to have the same attitude when it comes to companies too. Even our politicians are up in arms at the idea that the American pharmaceutical Pfizer wants to take over the British Astra Zeneca because they suspect the deal is all about stripping the assets from the British company and then benefitting from the low tax rate in the UK. In other words, using Britain as a tax haven. But it is the same politicians who have created the environment to make this possible. Attracting companies from overseas is one thing, but like with individual wealth creators, the wealth that is created needs to come into the economy.

So what do we really want? Do we create the conditions for individuals and corporations to pursue wealth for their own benefit (after all they have worked for it) and hope that we might gather up some crumbs from the table? Or do we want a system which works in the best interests of the whole of society, where each (individual and corporation) contributes to the good of all according to their means? The public reaction to both these stories suggests we want everyone to contribute to a better society. Let’s do what we can to make sure these principles are applied by those in power making our legislations, and think about these principles when we vote on Thursday.

Finally, thinking about contributing according to means and progressive taxation, I’m going to leave you to look up a story Jesus told about the offerings of the rich compared with a poor widow in Mark 12 v 41-44.

Calling to Account

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Last Friday it was time to put my money where my mouth is. I posted on this blog a few months ago about a campaign training event I went to with ShareAction and Christian Aid. If we have shares in a company, directly or via pension funds, then the company is investing our money, and we have the right to hold them to account. I previously wrote about a campaign to challenge pension fund managers, but the training also dealt with attending a company AGM to ask a question as a shareholder.

So, on Friday, I found myself, standing at the podium, as a corporate representative for ShareAction, ready to ask a question at the RSA AGM. My heart was thumping and my knees were shaking, but my voice was steady and the room was listening.

RSA is an insurance company, better known as More Than for personal insurance. They’ve had a bad year, making as big a loss last year as their profit the year before. There was a lot of hostility in the room towards the board from shareholders who had seen their dividend disappear. I’d expected to be intimidated by the board, but it was clearly the board which was on the defensive.

Louise, who came with me from ShareAction, had met me outside the trendy building in Central London, prepared all the paperwork, including the question, and filled me in on the company background. We signed in and then registered our questions. We already got a positive response from the team registering questions to our plan to ask the company about its tax arrangements. “I hope you get a good answer”, we were told. As a veteran of these occasions, Louise made me feel at home, and introduced me to another AGM campaigner preparing to challenge the company about its poor performance.

I asked my question about the company’s business in places used as tax havens, wanting to know if RSA had substantial business there, or just used them for tax minimisation purposes. Despite identifying the need for transparency, and the risk to the business of a tax avoidance scandal, the best answer RSA could offer was that it complies with all appropriate tax law. I tried to follow up suggesting that the issue was about more than compliance, but the board hid behind the need to manage their taxes for the benefit of the shareholder. Louise asked about climate change, but also followed up my question for me, eventually getting the board to admit that some of these subsidiaries were there for “corporate purposes”.

It was good to be able to directly ask a company whether they were using tax havens. I wasn’t sure how much difference this would make to the company’s actual behaviour, but Louise seemed to think that the evasive answering indicated that RSA was embarrassed by our question. Asking questions at an AGM is not going change things over night. It is one campaigning tool among many, aiming to raise awareness of issues with companies which might not otherwise consider these things, putting things like tax and climate change higher up the agenda, chipping away at accepted norms.

Would I do it again? Yes! Fitting in a trip to London has its own challenges, but there’s always the free lunch! Next time I’ll bring a bigger bag, as snaffling a couple of napkins full of flapjacks and brownies would seem to be the order of the day.