Tax is a dirty word to many of us. It represents the grasping hands of governments. We resent taxation and feel burdened by it.
We shouldn’t. At least, not usually. Tax is one of the few mechanisms of redistribution that works. When implemented progressively, it serves not just to pay for public services, but to reduce inequality. Welfare or social services are in effect a transfer of wealth from the rich to the poor, through the state.
Of course, redistribution sounds great to those on the receiving end, and terrible to those who will be net contributors – the rich. To avoid seeing your wealth passed on to others, there’s always the tax haven. These are small territories where little or no corporate tax is paid. Register your business there, or your permanent residence, and you get to keep a larger share of your profits.
The internet has made is much easier to move money around, so offshore banking is a growing business. There are now around 35-40 such countries to choose from, and they are well used by the rich, and by terrorist and organised crime syndicates. According to the Tax Justice Network, “tax havens are heightening inequality and poverty, corroding democracy, distorting markets, undermining regulation and curbing economic growth, accelerating capital flight from poor countries, and promoting corruption and crime around the world.”
Patience is running out on tax havens. Last year the union Unite urged the government to make the rich pay for the credit crunch by closing down tax loopholes. Barack Obama has pledged to deal with them, since the US currently loses $345 billion dollars in revenue through tax avoidance.
As he does so, he may run into some trouble with the British government. Tax havens are clustered around the Caribbean, the West Indies, and the tiny European countries of Andorra and Monaco and Lichtenstein, but the UK is the most important country involved. Somewhat bizarrely, the UK is responsible for around a third of tax havens, from the baliwicks of Jersey and the Isle of Man to remnants of empire in Gibraltar, the Cayman Islands, Bermuda, or Montserrat. According to George Monbiot, “Britain retains these colonies for one purpose: to help banks, corporations and the ultra-rich to avoid tax.”
Most shockingly, The Royal Bank of Scotland runs offshore banking on British islands. Since the bank was just nationalised, the government is now defrauding itself. If that makes you angry, read Monbiot’s article on ‘pin-striped pirates‘. It includes the news that the UK, along with Lichtenstein, thwarted efforts to reform tax havens in the recent Doha round.
Want to do something about it?
- Click over to Christian Aid and send their email to Gordon Brown, part of their campaign The Tax Factor.
- Join the Tax Justice Network.
- Stick the Tax Justice blog in your reader and keep up to date.