Comment: Get the tax dodgers to pay for the cuts

Molly Solomons: "Tax avoidance has become an industry in this country"
Molly Solomons: "Tax avoidance has become an industry in this country"

By Molly Solomons

This country is not broke, we only have to look at the profits and bonuses of big business and banks to know that. What is broken is when a political system claims to promote the 'big society' whilst the only things getting bigger and bigger are unemployment, inequality and anger.

Recently, this anger has bubbled over with the tax avoidance schemes of the rich and mighty. The poor paying their taxes, the rich none at all, is obviously immoral. Yet David Cameron does not have the authority to label Jimmy Carr tax affairs as 'morally wrong' because the prime minister not only refuses to apply the same standards to other offenders, but directly benefits from, encourages and rewards those who avoid tax.

For example, as many have noticed, Cameron did not condemn Gary Barlow, the recent recipient of an OBE as morally repugnant for his tax avoidance scheme. Nor did he condemn Sir Philip Green, the billionaire owner of Arcadia. Not only is he alleged to have avoided £285 million in tax in 2005, by channelling a £1.2 billion pay check through a network of offshore accounts, via tax havens in Jersey and eventually to his wife's Monaco bank account, but Cameron then appointed him to conduct a review of the government'’s spending cuts in 2010 . The list goes on and on. Even Cameron's father-in-law, Lord Astor, and Tory party donor Lord Ashcroft are well known users of tax havens, demonstrating that the PM deliberately turns a blind eye to tax-dodging by his rich and powerful friends and allies.


It is not just a case of a few bad apples either. This is a systemic problem because tax avoidance has become an industry in this country. An estimated £120 billion is lost annually through tax evasion and avoidance, showing that this country isn't running out of money, it's just that the richest and most powerful individuals and corporations are not paying their fair share.

The public may also be interested to know Cameron's 'moral' position on Lycamobile- the Tories' top corporate donor. They are reported to have paid no corporation tax between 2008 and 2010, explaining how they could afford to give the Conservatives more than £300,000 over the last nine months .
Rather than clamping down on companies, George Osborne in the recent Budget went out of his way to help multinationals reduce their tax bills dramatically through enabling their profits from offshore finance company subsidiaries to be tax exempt.

According to Felicity Lawrence, if a UK-based multinational "sets up a treasury company in Switzerland and puts equity into it from the UK, which is then passed on in loans to its other subsidiaries to run its operations, with interest on the loans flowing back in profits to the tax haven", then the tax rates on these profits will now "be a maximum of just one-quarter of the current UK rate".

The chancellor's announcement of these new policies will make tax avoidance much easier for multinational companies and banks. The Treasury itself has admitted these measures will lose the public purse £1 billion each year. Tax expert Richard Murphy described these new measures as a "deliberate promotion of tax haven abuse" .

Enabling tax haven abuse is another anti-democratic measure by this government and one which we can add to a very long and growing list. Earlier this year the lobbying scandal highlighted how wealthy Tory donors buy power and influence. Now we see how Britain's tax rules are being written by tax-dodging big businesses and banks, like Vodafone and Barclays, who sit on exclusive corporate working groups at the heart of government, crafting policies entirely for their own benefit.

In a lamentable attempt to appease the wave of public anger over tax avoidance by mega-rich individuals and opulent corporations, Osborne announced that the government would take steps to implement a general anti-avoidance rule, including a consultation document to be issued this summer. However, this amounts to very little given the scale of the problem - which the government only seems intent on worsening.

There is an alternative to regressive public spending cuts, to austerity, to greed, to making the poorest and most marginalised pay for the banks' crisis - the government must take firm action to stamp out tax dodging for good.

Richard Murphy has pointed out that what is really needed is a general tax avoidance principle. This is because any ‘rule’ designed by the Government to prevent tax avoidance would be undermined by accountants who ‘will always try to break every rule’. A principle, as opposed to a rule, Murphy argues, would allow HMRC to circumvent any elaborate avoidance schemes for good .

If the coalition really want us all to be 'in this together' they would ensure we collect tax properly and maintain a fair tax system. Instead the government plan to axe a further 10,000 HMRC jobs, on top of 30,000 that have gone since the department was formed in 2005 . Money invested in HMRC to deal with tax avoidance and evasion brings in £60 for every £1 spent- a very good investment when you consider the sums that could be collected .

In the UK, the thousand richest people have accumulated fortunes that are collectively worth £250bn more than a decade ago with giant corporations sitting on near-record levels of cash. As Stewart Lansley points out, "corporate surpluses stand at over £60 billion, around five per cent of the size of the economy". This is money which could be used to kick-start the economy yet is instead mostly standing idle, resulting in paralysis .

Treasury figures show that almost a thousand UK taxpayers earning more than £1 million a year have a tax rate of less than 30% of their income and, of the 200 taxpayers earning more than £10m a year, 12 are paying less than ten per cent in tax .

Furthermore, the regressive reductions in the top rate of income tax to 45% and in corporation tax- to 24% show that this government is extremely comfortable with the wealthy getting wealthier whilst the dole queues grow.

Take Amazon.co.uk for example. Earlier this year it was reported that in 2011 Amazon’s British operation made £3.3 billion in sales but paid not a penny in corporation tax on any of the profits from that income. The company is now under investigation by the tax authorities, according to media reports. 

David Cameron and George Osborne have the power to act. They must change the law to stop this unfair and unjust behaviour. We are losing billions every year through tax dodging. The introduction of a progressive and fair tax system would provide a real and credible alternative to the government’s massive public sector cuts.

Molly Solomons is a member of UK Uncut. She has occupied banks, high street shops, Fortnum & Masons, Westminster Bridge and Regent Street in the fight against the cuts. She works for a homeless charity.

The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.
 

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