When you write about big global issues every day, it’s easy to lose perspective in the enormity of it all and miss the little steps forward along the way. One of the areas where there is definite progress is tax dodging. Just four or five years ago, there was practically no public debate about tax havens or tax avoidance at all. Now it’s taken seriously enough for a prime position on the agenda at the G8 summit.
Here’s David Cameron:
We must fight the scourge of tax evasion by promoting a new global standard for automatic information exchange between tax authorities. And we must tackle aggressive tax avoidance by encouraging better global reporting to tax authorities in both the developed and developing world; and by letting tax collectors and law enforcement find out who really owns and controls each company.
Note that Cameron is promising to tackle both illegal tax evasion, and legal tax avoidance. This is new. Britain has been silent on tax issues for a long time, mainly because we still run many of the world’s tax havens.
But the change isn’t just in government. In 2007 The Economist claimed that “tax havens are an unavoidable part of globalisation and, ultimately, a healthy one.” This year they had a special edition on tax havens and articles on “how to stop companies and people dodging tax.” Or take The Spectator. Ten years ago it could publish recommendations on tax havens – “Costa Rica is my tax haven of the year” wrote columnist Christopher Fildes. This year it hosted an article titled “Tax avoidance must stop, and companies themselves must lead the way”.
Both these publications are still skeptical and are far from becoming champions of tax integrity, but they are symptomatic of a cultural change. Discussions that were off-limits are now permitted. Accounting practices that were simply considered clever are now considered morally questionable.
What’s changed? The enduring recession has forced the government to look at new ways of securing revenue. That’s probably the biggest factor, but it’s impossible to ignore the work of campaigns and NGOs in raising awareness of the problem. Groups like UK Uncut have protested imaginatively around tax avoidance. ActionAid and WDM have run extensive campaigns around tax, and the IF campaign has put it front and centre. Tax campaigners like Richard Murphy or the Tax Justice Network suddenly found they had company, after years of being niche specialists. Nicholas Shaxson‘s book Treasure Islands lifted the lid on tax havens and new campaigns like End Tax Haven Secrecy or Tackle Tax Havens spread the word.
Through the work of these groups and people, a light has been shone on an issue that most people knew very little about. The media have picked up on it, and it’s now a scandal when a celebrity or a corporation is found to be dodging their tax, whether they’ve done it legally or not.
The problem is far from being fixed of course, and the gulf between talk and action remains vast. It would be premature to declare any kind of victory, but when you stop and look at where we have come from, things are moving fast. Cultural ideas about what is and isn’t acceptable behaviour are changing. Campaigning can work, and it’s good to be reminded of that from time to time.
The Earthbound Report 
it was about 5 years ago, when an article ‘Bearers of the Black Sea Shelf drew attention to the role of the British Virgin Islands and the use of bearer shares to conceal the identity of those investing in the extraction of hydrocarbons.
Seemingly Nathaniel Rothschild, whose JNR company were the original financiers, stepped out in favour of persons unknown. We still don’t know what he Mandelson, Osborne were talking about on Oleg Deripaska’s yacht.
Hi Jeremy, We hear talk of Tax evasion and tax avoidance all the time now, but in many cases the terms are used as if there was no difference between them, In many cases I believe that the commenter has no idea what the difference is. One more than one occassion recently I have heard/read someone talk about how terrible tax avoidance is and it should be stopped, and the people who are avoiding tax should be ashamed at the least and perhaps reported to the police for prosecution. To my mind though if the law allows a person to do something with their financial situation that allows them to pay less tax then there is nothing wrong with that and in fact they should do it. As an example how many people would consider putting money into a Cash ISA, to avoid paying tax on the interest, to be immoral. If there is a scheme where a companies directors can put money away and then get it back after 5 years without paying tax on it then why is that wrong as long as it is legal?
Another issue, not strictly tax avoidance, but why do we assume that the Government has the right to tax us to the extent to which it does, I have read somewhere that we pay something like three quarters of our incomes in taxes of one sort or another, I can’t see how thats right but when you think about it all and count up the different taxes it certainly adds up to a considerable percentage.
Jim
I take the attitude that it’s right to pay my taxes, and even to feel a certain pride in helping support other activities, infrastructures and disadvantaged people by doing so. I think that cash ISAs were introduced to encourage people to save, and I’ve never seen them as tax avoidance measures – people who have adequate savings often make less demands on the state, particularly in their later lives, and probably save the government money in the long run.
Hi Jack, The thing is that people with higher income levels may be looking for additional ways to save mone that are tax efficent. I have a fried who is putting money into the same ‘scheme’ that certain comedians recently got slated for. They are putting in £100,000 over 5 years and then get it back tax free, now bear in mind this is a generalisation as I don’t know the ins and outs of it. The scheme is totally legal and is in no way immoral as far as I’m concerned. So why is a tax ISA OK and this scheme immoral (according to the papers) They are both just a way to reduce tax liability.
I understand what you are saying in taking pride in paying your taxes, I insist that every penny that comes into my business goes through my books so that I pay all the taxes on it, but on the other side I also set everything I spend in my business against the income. If I had other options to reduce my tax I would take them.
Jim
The difference between ISAs and tax avoidance schemes is that ISAs are specifically permitted by law, the government intends for them to exist, but tax avoidance schemes are about finding gaps in the regulations, not specifically intended to exist, or intended for a different purpose. Simpler, clearer, tougher tax laws would be a better way of dealing with the problem than just trying to shame people and companies out of using them, though.
I had a message for Ed Miliband the other day about responsible capitalism
This part was from our website and was written years before the debacle over corporate taxation: :
“Profits are not shielded in any way from normal taxation that any for-profit business has to pay. Whatever is left over is invested in the social purpose or purposes of our own choosing. That way we can do business in the normal, traditional way, changing only one thing: the output, what happens with profit.”
The rest of the message is about walking rather than talking it
http://www.p-ced.com/1/node/118
Theft. A criminal act in which property belonging to another is taken without that person’s consent. http://legal-dictionary.thefreedictionary.com/theft
Does your government ask your consent before it dips its hand in your pocket and takes you money?
No it doesn’t. So why should I not take every step legal allowed to me to stop it.
that’s an age old philosophical debate, best articulated in the 1700s by Rousseau and his notion of a ‘social contract’. His suggestion is that we essentially are born into a social contract where we give up certain rights to the state, and in exchange the state guarantees the rest of our rights.
So you have to surrender part of your income. But in return, you get to call the police if someone robs your house. You get an education, healthcare, a pension, military protection from enemy nations. You get streetlights and your rubbish taken away, and a thousand other things.
Of course, that social contract works both ways, and it’s up to us to use our democratic tools to make sure that government doesn’t take too much, or fail on its own responsibilities.
If you really can’t tolerate the idea, you can absolve yourself of all this and renounce citizenship. You can move somewhere else, or try a state-free part of the world like… erm, Antarctica or maybe rural Somalia.
I always like the P J O’Rourke argument on taxes ‘all tax revenue is the result of holding a gun to somebody’s head Not paying taxes is against the law, If you don’t pay taxes you’ll be fined. If you don’t pay the fine you’ll be jailed. If you try to escape from jail you will be shot.
Thus I in my roles as citizen and voter am going to shoot you in your role as taxpayer and ripe suck if you don’t pay your fair share of the national tab.
Therefore, every time the government spends money on anything, you have to ask yourself, “Would I kill my kindly, gray-haired mother for this”‘ (A Parliament of Whores)
The focus on tax evasion/tax avoidance is a political tactic from the left and the right. From the left the the narrative is that there is a big pot of money that if it can only be tapped means we don’t need to make any cuts. From the right it is to head off this story and show everyone is paying their share, and even so there isn’t money to avoid cuts. It is just a shame that so many people are taken in by the hugely inflated figures Richard Murphy/TJN (they are one and the same) are making up.
My hope is that as people look at this issue more they will see that perhaps taxing companies is the wrong way to go about this. What is decried by tax campaigners has so far been shown to be perfectly legal whenever tested in court. One of the reasons the HMRC doesn’t go to court so much is that if they loose then the law is clarified against them.
Any economist will tell you companies don’t pay tax. The incidence of any tax levied on a company falls on either the consumers (through higher prices), staff (lower wages & compensation), or owners (lower dividends). So perhaps we should stop taxing companies and start taxing those groups directly.
There is a case for passing the burden of taxation onto the actual users of a given product or service. If you’re buying, it’s your demand that creates those businesses in the first place, so actually it should be consumers that pay, rather than corporations. It’s one point of view, and a legitimate one. In Britain we tend to take an ‘all of the above’ approach.
Tax systems tend to get made up as they go along, rather than designed for a stated purpose. Other tax systems are entirely possible, and if we were starting from scratch I’m sure if would look very different.
Perceptions are one thing, action is another. PR shapes the former, to appear as the other and that’s how we’re seeing the rebranding of social innovation. The invisible hand and the invisible heart.
If it’s an invisble heart, one imagines it wouldn’t need a PR company to promote it.
http://www.p-ced.com/1/node/121