Tax

Labour has now published its new corporation tax policy, in four parts, each of which I consider in  turn:

1. HMRC

Both the administration and enforcement of the tax rules have been impacted by cuts to HMRC resources, with the Chancellor pushing through over £2 billion of deep cuts. The Government plans to cut a further 10,000 HMRC staff, which risk being a false economy, as there has to be a limit to HMRC’s capacity to do more with less. Despite all the rhetoric about tackling tax avoidance, the progress made by this Government is limited at best. The deal struck with Switzerland is less transparent than a similar deal struck with Liechtenstein by the last government.

The latest NAO report has shown what can be achieved when a government is serious about tax avoidance and praises Labour’s disclosure laws for closing down avoidance opportunities and bringing in £12bn of extra tax since they were introduced. But HMRC needs to be given sufficient resources to do its job effectively.

We will consider what powers HMRC might be given to strengthen the corporate tax regime in the UK, within international frameworks, and how Corporation Tax could be better administered and collected.

I unambiguously welcome this move. It is timely, right and necessary.

2. General Anti-Abuse Rule

The current government has introduced a General Anti-Abuse Rule (GAAR) targeted, by its own admission, to tackle only the most egregiously abusive tax avoidance schemes.

Although the Government sets great store by this measure, if it means that fewer efforts are made to update targeted anti-avoidance measures, or it if is a mere fig-leaf for the withdrawal of resources from HMRC, then we will not see any reduction in aggressive and abusive schemes.

We will look at how the GAAR can be strengthened to ensure there is a reduction in aggressive, abusive schemes, as well as what additional measures might be required.

We will also consider how we can ensure that tax avoidance activities not covered by the GAAR aren’t, by implication, deemed acceptable.

Again, this is appropriate and welcome. I can support this move and the commitment to see how the General Anti-Abuse Rule works before deciding next steps is fair. And if the last means a clearance system, it’s better still.

3. Transparency

We need an end to tax secrecy. At the moment it is too easy to set up complex networks of companies within a group, some of which can be based in tax havens, and move profits between them. This can make it very difficult to assess the overall amount of tax paid. Multinational groups can and should be able to structure however they wish, but there is no reason why they should not have to produce a simple statement of the amount of corporation tax they pay in the UK, in a way that all of us can understand, experts and non-experts alike.

To make that happen the government should put concrete proposals on the table for the G8 to deliver internationally agreed action on tax transparency.

There are a number of immediate areas where we should be showing leadership:

i. Pursuing a new system of disclosure for multinational companies, that will require information to be published that will be of and practical benefit to the revenue authorities in developing countries where they operate. An approach based on Intelligent Transparency will deliver real benefits without imposing a heavy administrative burden on companies or creating masses of data that developing country revenue authorities simply cannot use;

ii. Extending the Disclosure of Tax Avoidance Schemes regime, which Labour introduced, to global transactions;

iii. Opening up tax havens, with requirements to pass on information about the individuals operating through networks of company or trust structures;

iv. Assessing the impact of changes to the Controlled Foreign Company rules on the UK and developing countries.

If multilateral agreement takes too long to be achieved, we need to examine how the necessary transparency of revenues, profits, and taxes paid can be delivered through UK government action, to provide leadership in the international community.

Companies will have a strong incentive to pay their fair share of tax when it’s clear to everyone where rules are unfairly being manipulated.

So Labour will consider how best to publish a simple statement of the amount of Corporation Tax paid by a company, or group of companies, in the UK. We will also look at what other transparency measures might be necessary to assess whether companies and individuals are paying the right amount of tax in the UK, as well as how international transparency can help ensure a sustainable tax base in the UK and the developing world.

I’ll be candid: I’m disappointed here. The words that are missing are ‘country-by-country reporting’. They reached the papers. Ed Miliband clearly said them. I ma baffled why they can’t be included here. And what is proposed is not good enough:

a) A statement of tax paid in the UK without statements on sales, costs, labour spend, profit and investment. Accounting information is only valid in comparison. This statement will be of very little value as a result.

b) There’s no point having a statement for the UK and nowhere else: we need everywhere (especially tax havens) to make sense of whether the tax paid here is fair, or not.

c) We do, of course, need data for developing countries. But we need it here in the UK too.

d) Country-by-country reporting is not an admin burden: every company has to have this data anyway. And any developing country tax administration that can read accounts could use country-by-country reporting data. Saying they’d be over-burdened with data is just wrong as a result.

e) I admit, I have never seen how extending DOTAS internationally could work. I can’t see how HMRC could know if they got accurate data, or none at all and as such can see no way such a scheme could be enforced in which case I admit I can’t see how it could ever be workable.

f) Tax haven transparency is vital and I am pleased it is explicitly referred to: but let’s be clear about the fact we also have to know this data in the UK and we’re a long way from doing so right now.

g) Assessing the impact of all tax policy on developing countries is, I agree essential.

Now maybe I’m being too critical: the words used to brief the press have been stronger than this policy paper. In that case I would be pleased. And I note that this is exploratory: if Labour want me to advise, I’m happy to do so.

4. Domestic reform

This isn’t just about individual companies. We are going to have to reform the current rules that allow companies to make profits in Britain but pay no tax. That means reform of our Corporation Tax system. In the 21st Century value is now often in brands, intellectual property, customer loyalty and ideas which can be traded globally between different parts of a corporate group. The rules need to be clearer, tighter and properly enforced.

Labour will examine the international lessons to be learned on how we can improve UK rules, particularly from countries where rules are more strictly applied. We will also consider whether transfer pricing rules can be improved and if there are better ways to assess the value of intangible assets being moved within corporate groups.

With the Coalition Government full of tough talk but still failing to act on tax avoidance, either at home or abroad, One Nation Labour will deliver the tax fairness and transparency required for a system that can support a recovery made by the many, not just for a few at the top.

These commitments are good: the direction of travel is right. But there’s no mention of moving on from arm’s length pricing towards better ways of allocating profits between states, and that is essential. Transfer pricing can’t, eventually be improved: it’s an intellectually flawed system.

So, this paper is a welcome step forward, but the bullet point summary Labour obviously supplied to the Observer today was so much better. It said Labour would:

■ Pursue a new global system where multinationals must publish their revenues, profits and other key corporate information useful to revenue authorities in each country in which they operate.

■ Force multinationals to publish such information in the UK even if international agreement cannot be found on the issue, as they do in Denmark.

■ Make it a legal requirement for multinationals operating in the UK to disclose details of any tax avoidance schemes they are using globally.

■ Seek reforms to “transfer pricing” rules to stop companies from shuffling money to other parts of their firm based in tax havens in return for spurious services.

■ Open up the ownership of companies sited in Britain’s tax havens to the UK revenue authorities, but also seek to allow developing countries access to such information.

That’s the sort of language we really need. I’ll hang on to that list. And offer Labour help any time they want it on these issues.

The FT reported late yesterday:

Britain’s employees are feeling more insecure and under pressure at work than at any time in the past 20 years, a large-scale study of the workforce has found.

For the first time, public sector workers are more worried than those in the private sector about losing their jobs. They are also substantially more anxious about losing their status at work.

So we have massive corporations confident they need not pay tax whilst at the asme time they can exploit a workforce so reduced to worry about their that they will take work on steadily worsening conditions, and for many on steadily worsening pay.

Is that coincidence or is it just more indication of the onward march of the 21st century neo-feudal state that is being created to undermine the 99% for the benefit of the 1%? I think you know what I think.

The Guardian  late yesterday:

Marks & Spencer has become the latest in a string of UK companies to face criticism from tax campaigners over the way it structures its online sales to Europe – with one describing the its sales operation as similar to that of the internet retail giant Amazon.

I suspect that was not the name most expected to appear next on the list of tax avoidance suspect, but as the Guardian notes:

The British retailer has been expanding its online operations to several countries across Europe with a new marksandspencer.eu site, as part of its hopes to grow its business in a difficult economic climate. But internal M&S documents seen by the Guardian show that the firm’s structure involves shipping goods from one country – the UK – while invoicing the transaction to another – Ireland. Orders made through the new site by customers from France, Germany, Ireland or other countries are all shipped from M&S’s UK warehouses – but the transactions are all made with, and charged to, Marks & Spencer (Ireland) Limited, a subsidiary located in the Republic of Ireland, which has the lowest corporation tax rates in Europe.

Now let’s be clear: there’s nothing illegal about this (it has to be said). And it’s also true that, as the Guardian notes:

Marks & Spencer’s UK branch is paid a wholesale price for the goods it ships by M&S Ireland, and this is subject to UK corporation tax, but then the rest of the retail markup is then subject instead to Ireland’s much lower corporation tax rate of 12.5%.

As a result the defenders of such schemes will, no doubt say that this is not tax avoidance at all. But it it looks very likely that it is since as the Guardian also note:

A specification document prepared last year when the new site was being designed specified that “[t]he corporate tax structure will be aligned to that of the Irish website”.

The document then detailed how, while the goods would be shipped from the UK, M&S UK would only receive a wholesale – not retail – price: “Goods issue from Hardwick DC [distribution centre] in the UK at cost price … intercompany invoice at cost price in GBP with a variable mark-up % by country (of order) plus UK VAT”.

Whilst in another mail, sent when the UK corporation tax rate was cut this was said:

“Given that it was developed as a means to avoid UK corporation tax when it stood at 26% it now seems appropriate to reassess this,” it read. “Corporation tax will be 21% by next year. Does this not render many of the advantages of having an Irish company obsolete?

“From a tax management perspective there may have been advantages in avoiding the UK 26% tax rate but the process and IT overhead with the additional VAT complexity may negate these advantages. Needless to say there is also the reputational damage to M&S should it be seen to be avoiding UK tax in the current climate, as seen with recent examples such as Starbucks [and] Amazon.”

I think the motive for the Irish operation is more than abundantly clear, although M & S issued all the usual defences, including references to their being good enough to pay over their staff’s PAYE to HMRC, and the following:

“These are not UK sales, these sites do not serve UK customers and there are no sales made in sterling. All tax is legally and fairly paid both in the UK and in Ireland.”

Sorry: that does not wash. These are goods shipped by UK staff from UK warehouses on which the full resulting profit is not recorded in the UK. As was noted in the paper:

Richard Murphy, an accountant who writes for the UK Tax Justice Network, agreed. “There is no doubt that this is Marks & Spencer is ‘doing an Amazon’ by setting up an arrangement in a low tax jurisdiction where little or nothing happens to avoid tax where the trade really takes place.

“As Ernst & Young told the public accounts committee last week, such arrangements are common. But what that means is big business is now used to playing games with tax authorities, who appear to have meekly accepted there is nothing they can do about it. That has to change.”

I stand by that.

Owen Jones’ column in theIndependent this morning contains an interesting idea:

Perhaps we should take [Google's Eric] Schmidt’s “aspiration” to do the right thing at face value. But if Mr Schmidt is anything like me, he might need a bit of outside assistance to achieve his aspirations. So, how about we legislate to crack down on all forms of tax avoidance: like passing the General Anti-Tax Avoidance Bill, drawn up by Richard Murphy and introduced by Labour MP Michael Meacher. It’s for your own good, Mr Schmidt. And who knows. Those undoubted occasional pangs of guilt at benefiting from state largesse and paying so little back may even subside.

Sounds good to me.

Larry Elliot’s been writing about tax in the Guardian this evening. “Tax,” he says ” threatens to become to the 2010s what debt relief was to the 1990s: the focus of a global campaign for reform”. I thought it already was, but let’s not quibble; the interesting bit is what he goes on to say:

In the end, though, the success of any campaign will depend on how the public behaves. If we don’t like the current state of affairs, we can do one of two things. We can put pressure on governments to break up monopolies and inject more competition. We can call for a new business model, based on “for benefit” organisations, to challenge the domination of the joint stock company. We can force them to introduce sales taxes to avoid profits migrating offshore. Alternatively, we can vote with our feet, and stop patronising the companies that exploit loopholes in the tax system, even though that might mean higher prices and less choice. If we are not prepared to do one of these two things, we will have to lump it.

For me the former beats the latter, time and again: it has to, because only informed debate can generate this change. I think we’ve already shown that. For a start, you can’t beat monopolies with boycotts. But Larry’s right about this:

After the events of the past few years, it would be naive to expect the initiative to come from the boardroom. Corporate social responsibility has been a smokescreen behind which companies can screw their customers while pretending they are putting something back. The activities of the banks and the energy companies illustrate the point. Capitalism is not about being cuddly or sponsoring exhibitions at the Tate Modern; it is about making profits, the higher the better.

And that, when done in association with monopoly power does not add value to society; it can destroy it.

Nick Cohen had a great article in the Observer this morning saying:

If you want to understand any society, look at its tax system. If one man or a clique can tax at will, you can conclude the society is a dictatorship or oligarchy. If you have reasonably progressive and universal taxes, you can assume it is a modern democracy.

He’s right. But as he also notes:

Britain has elements of democratic taxation. The same rules on occasion apply to everyone. But other parts of the system resemble the ancien régime of pre-revolutionary France. Only in our case the privileged estates the government exempts from taxation are the corporations rather than the aristocracy and the church.

And there is good reason for this:

For a generation, politicians have extended exemptions by selling Britain as a country where big businesses would be lightly taxed.

British politicians and a series of negligent and doltish managers ordered the Revenue to back away from big business.

As he concluded:

I have written before that the willingness of New Labour, the Tories and the Revenue’s senior managers to pursue the working and middle classes while exempting powerful corporations would turn the British into Italians. We would start to believe that tax evasion was respectable. We would view a state that hit the ordinary man and woman while sparing big business as immoral and illegitimate. That moment is drawing closer. The old complaint that there is one law for the rich and another for the rest does not do justice to the debasement of public authority in Britain. When it comes to tax, too often there is no law for the rich whatsoever.

And that is the stark reality that too much of the accounting profession is all too willing to deny. But in doing so they deny the essence of democracy itself, and that’s what is at stake here.

The Sunday Times reports this morning that:

Barney Jones, 34, who worked for the internet search giant between 2002 and 2006, has lifted the lid on an elaborate structure which diverts British profits through Ireland to the Bermuda tax haven.

Although Google’s London sales staff would negotiate and sign contracts with British customers, and cash was paid into a UK bank account, deals were technically booked through its Dublin office to minimise its liabilities here. Jones, a devout Christian and father of four, is ready to hand over a cache of more than 100,000 emails and documents to HM Revenue & Customs (HMRC), detailing the “concocted scheme”.

Much more follows.

The problem with a lot of tax planning that looks too artificial to be true is that it’s almost impossible to deliver in practice. Will that be the undoing of Google?

The Observer has been even handed this morning. As well as reporting the efforts to stop global tax abuse it also gave a column to Eric Schmidt, Google’s global Chairman. I have to say he used it to spread misinformation which I feel duty bound to rebut. He opened saying:

At a time when families are having to tighten their belts and funding for vital public services is under pressure, corporate taxation is rightly a hot topic. And as a company that has always aspired to do the right thing, we understand why Google is at the centre of that debate. In the interests of moving the argument forward – away from accusation and toward action – here are three principles we hope most people can agree upon.

So far, so good. He then began to set out those principles:

First, corporation tax should be paid on a company’s profits, not its revenues.

Well, maybe. Actually there’s a lot of evidence that internet companies (Amazon, in particular) also avoid sales taxes. So, the claim is only partly right. But he’s referring to corporation taxes here so I let him continue, saying:

When a company only operates in one country, it’s obvious where its profits are generated and thus where its taxes should be paid. But for multinational companies with a global presence, it’s much more complicated. To pay the right amount in taxation, you need to determine where the profit is actually created. So most developed countries, including the UK, have worked together to create a set of tax treaties. These are based on the principle that corporate taxes are levied in the country where a company conducts the economic activity, and takes the risk, that generates its profits – not where products are consumed.

This is just not true. It’s absurd to say that a company makes all its money where it engineers its product. If it was true we’d need to know why Rolls Royce, despite having its engineering and most of its people in the UK paid no tax here, but paid lots elsewhere, for example. We’d also need to know why Google, despite engineering its product in the US actually records much of the world wide profit arising from it in Bermuda. And the claim is anyway just wrong. You can’t make a profit without customers. It’s impossible. So a major part of profit allocation has to go to the sales teams that face customers. And Google has a very big team of such people in the UK who it denies make any money.  No one says they make all the value in the UK sale: that would be absurd. But to say they make no margin at all, as Google does, is equally wrong. And in that case this first claim by Schimdt is best described as sophistry, but not truth.

He continued:

Second, politicians – not companies – set the rules.

This is almost risible in the current environment of corporation tax. Companies spend small fortunes lobbying for the tax laws they want; the non-exec board of HMRC is made up wholly of large business people, almost all consultation panels on tax are comprised almost entirely of representatives of big business or their sponsored academics, lawyers and accountants (the General Anti-Abuse Rule being an exception where we were outnumbered 9 to 2), the OECD listens to big business almost entirely and the result is business gets that tax it wants. This claim by Schmidt is simply unjustifiable.

But I should let him finish:

Third, given the intensity of the debate, not just in the UK but also in America and elsewhere, international tax law could almost certainly benefit from reform. It’s why the Organisation for Economic Co-operation and Development (OECD) will be publishing a hotly awaited paper in July on how to make these rules simpler and more transparent. Change won’t be easy because it will require the renegotiation of international tax treaties, not just action by individual nation states. And many of those countries will doubtless have competing interests.

For example, it’s tempting for every government to assume that they will benefit if and when the current structure changes. But in reality, it’s probably only a significant increase in corporation taxes globally that would make every country a “winner” – and the consequences of that would likely be less innovation, less growth and less job creation.

Look at the markers being laid down already:

“We’d love reform, but it’s so hard”

“We want reform but it’s competing national interests that prevented it – even if we did sponsor the idea of tax competition and exploit it in the first place”

and

“You’re really being anti-business in asking for reform – because after all, asking us to pay tax is anti-business”

and

“If you spite us, we’ll spite you”

It’s nice, isn’t it?

Margaret Hodge was right: Google does evil.

The Observer has featured on tax issues this morning it seems. In their special report on tax avoidance they set the scene, saying:

The debate is now raging over whether these companies are the happy beneficiaries of a tax system knitted with loopholes, or the malicious purveyors of smoke-and-mirror accounting. HM Revenue and Customs claims the former – public opinion is rolling towards the latter. Lin Homer, chief executive of HMRC, claimed the public don’t understand. Asked why she was not taking a tougher line with internet giants, she told the public accounts committee: “We see, but understand more fully, some of the information that might seem to the general public to be surprising.”

In response they add, using quotations from me:

But campaigners say tax collectors and leading politicians have been caught out; too engrossed in austerity plans, they are scrabbling to keep up with people who point out that there are other ways to balance the books.

“Without a doubt, they are behind the curve,” said Richard Murphy, a chartered accountant, economist and founder of Tax Justice Network. “They have all been caught by surprise because this has come from civil society, a campaign that has been going on for almost a decade but has only been picked up by politicians after the banking crisis when they suddenly realised they were desperately short of cash.”

He said HMRC had been ducking tax avoidance completely. He said it had powers to tackle any suspect tax returns of foreign-based companies. “If the breach is blatant, then they can act. What we haven’t got is politicians who will stand up to this. It’s a critical point. If the state will not stand up for its right to tax big corporations then we are in deep trouble.”

Richard Murphy said the moral case for international action had already been won. “We now just have to beat off the accountants and businesses who oppose democratic accountability to the state to get it,” he said.

This last quote refers to a blog here, yesterday.

I was pleased to note the piece highlighted was a block quote in the article: this is the core of this issue, which is why I am so pleased that Ed Miliband has come out on the issue today and has, as the piece notes  backed a “country by country” international scheme on tax declaration whilst condemning the fact that so far no firm proposals have so far been put forward for the G8.

Read the whole thing: there are good quotes from Melanie Ward at Action Aid too.

I am quoted in the Sunday Mirror today:

Tax expert Richard Murphy said: “By being cheated out of £183 each year the British people are being taken for a ride.

“We need a big politician to stand up to these companies.”

That reflected a blog I wrote yesterday morning. Well, it looks like we’ve now got one who has stood up to do so. Good for Ed Miliband.

I did have one quibble with the Mirror story though: they used HMRC’s estimate of tax avoidance, and not mine. As a result they understated the problem, by some way.

Ed Miliband has adopted the tax justice agenda. According to the Observer this morning:

Ed Miliband has vowed to rip up the rule book as prime minister and go it alone if there is no international consensus to tackle multinationals engaging in massive tax avoidance.

In an interview with the Observer, the Labour leader urged David Cameron to find agreement at the G8 summit of leaders next month around an ambitious agenda forcing corporate giants to pay their fair share.

He said that, if Cameron fails, he himself as prime minister would unilaterally act to make multinationals operating in the UK more transparent about the money they make here, the movement of cash around their corporate structures, and the justifications for the tax they pay.

That is the message the UK wants to hear. He’s specifically committed to:

■ Pursue a new global system where multinationals must publish their revenues, profits and other key corporate information useful to revenue authorities in each country in which they operate.

■ Force multinationals to publish such information in the UK even if international agreement cannot be found on the issue, as they do in Denmark.

■ Make it a legal requirement for multinationals operating in the UK to disclose details of any tax avoidance schemes they are using globally.

■ Seek reforms to “transfer pricing” rules to stop companies from shuffling money to other parts of their firm based in tax havens in return for spurious services.

■ Open up the ownership of companies sited in Britain’s tax havens to the UK revenue authorities, but also seek to allow developing countries access to such information.

The first is, of course, country-by-country reporting, which has for so long been campaigned for by me and the Tax Justice Network. The third comes from Christian Aid and Action Aid; the fourth is an area where I think it fair to say Tax Justice Network also leads and on tax havens I don’t think anyone can be in doubt where I stand on the need for transparency and accountability.

This is, then, a good morning for Tax Justice since when Labour is still making few commitments on specifics these are clear dividing lines between them and the Coalition and I welcome that as this puts this whole issue centre stage  where it deserves to be.

It is not, however, just the announcements that do that. So do the comments that surround them. I warmly welcome this:

He would also increase the resources of HM Revenue and Customs to strike at tax cheats.

And this:

Miliband said: “Now, what is the politicians’ responsibility: change the law. But it is also to talk about the kind of society we want to create and what the responsibilities of a company like Google are. I don’t think they are living up to their responsibilities at the moment, and I will be very clear about that on Wednesday.

“It is part of a culture of irresponsibility. If everyone approaches their tax affairs as some of these companies have approached their tax affairs we wouldn’t have a health service, we wouldn’t have an education system. And actually the point I will make at Google is that will undermine Google.”

And he got it right to say:

Miliband said the government was “dragging its feet” on the issue of tax avoidance. “They have got to act. If they don’t act, we will act in government. This is an absolutely massive and serious issue.

He’s spot on to say that. But perhaps as importantly, he got the economics right:

“I think it is a pro-business agenda to say that people should pay their fair share at the top. The head of a big British retailer came to me recently who was outraged by some of the things going on. He was saying he pays his taxes. The business world feels strongly about this.

“This has an impact on people in their daily lives. The less the big companies pay their fair share of tax, the higher tax others will have to pay, the worse the services they will receive.”

People know that. Saying it will help his cause.

The world of tax is in a mess. Google, Amazon and, according to Ernst & Young before the Public Accounts Committee, many more companies are persistently abusing the international tax system to make sure they do not pay tax where it is very obviously due. The person who can deny that tax justice, and the credibility of national tax systems, requires that a company making sales in a country, using staff employed and substantial it owns facilities in that country for consumption by people in that country, is not taxable there as a result of abuse of a contract clause designed in another era (Article 5 of the standard OECD double tax treaty) in a way that could never have been foreseen is not just willfully blind to reality; they’re also actively seeking to undermine the rights of democratic governments, including our own.

I have commented, often, that the fact that business and the Big 4 firms of accountants willingly participate in this process is not surprising. As was admitted by the MD of Waitrose (of all companies) yesterday on Radio 4, those running such companies think it is our duty to now accept that the era of national democratic government is over and that we should accept that rule by multinational companies will soon be the explicit norm. That, of course, suits the 1% of the population who might gain as a result very well.

What is much more surprising is that the governments and tax authorities of the world so tacitly participate in this process. I have, of course, argued that both have been captured for their own gain by the business elite: in the case of H M Revenue & Customs this corporate takeover of a state function is now so explicit that it’s almost possible to see the strings linking HMRC permanent secretary to her chairman, former KPMG senior partner Ian Barlow.

But that need not be the case, and internationally it is not so obvious that the same situation exists. So, in that case three questions have to be asked.

The first is why is it that we apparently have a world tax authority in the form of the OECD without anyone having appeared to agree to it, and to which we must all apparently bow if it comes up with no solution to this issue (which its boss, Pascal St Amans is intellectually disinclined to do, despite all the bluster of its February report on Base Erosion and Profit Shifting).

Second, why aren’t we willing to challenge the abuse of double tax treaties using domestic law? After all, the whole purpose of double tax treaties is to make sure that the right amount of tax is paid at the right time and in the right place. The reality is that they are now widely known to be used to ensure that far too little tax is paid as a result of the use of wholly artificial structures whose purpose can only be explained by a desire to minimise tax. The weasel words of Big 4 accountants to the contrary can safely be dismissed on this issue because it is obvious that they are simply the hired architects of those who abuse. In that case it is absurd that the General Anti-Abuse Rule – in which I acknowledge I played a part – deliberately does not go near such arrangements. The need for a General Anti-Tax Avoidance Principle that does let us tackle this abuse by saying that the legal form of these arrangements does not reflect their economic substance and so can be ignored for tax purposes is long over due. What is more, the OECD recognises the right of states to do just that, as does the EU (who is actively encouraging states to adopt general anti-avoidance principles). So, the question has to be asked, just what is the problem?

Third, and last, why is there such reluctance to ask companies to be accountable to states? The case for country-by-country reporting is being won, steadily and yet the support of elected politicians remains far too lukewarm. Cameron, for example, talks about it as a voluntary measure as if tax compliance with the laws of the UK was an option for multinational corporations. This is about the very essence of democracy, and the battle to keep that democratic process in place and not to surrender it to the corporate (fascist) state is in progress, now. So why are democrats so unwilling to take the fight on, Margaret Hodge apart?

The good news is country-by-country reporting is possible.

And a General Anti-Tax Avoidance Principle that defeats the sort of multinational corporation abuse we are facing is possible.

And the OECD tax model can be evolved into a unitary tax system that would defeat these shenanigans, as explained here.

All this is possible.

The question is why aren’t we willing to do those things? And for that we have to hold our politicians to account.

As the Guardian editorial notes this morning:

Whether it’s Jimmy Carr or Starbucks, public anger over tax avoidance must be most evident in the UK. No wonder David Cameron has made a new deal on tax a key objective of this summer’s G8 summit. The economist Paul Collier, who is advising the government, has suggested multinationals report the scale of their economic activity in each state. Such transparency would be cheap and easy for the likes of Google to provide (isn’t providing information its business?); but even that has been resisted by big business. Yet it would be a modest first step; as would Revenue and Customs disclosing all of its sweetheart deals. Openness might be a small victory, but it could open the way to much bigger ones.

The moral case for country-by-country reporting has been won: we now just have to beat off the accountants and business who oppose democratic accountability to the state to get it.

The Tax Justice Network and Tipping Point Film Fund are jointly organising a day of activity in London on Saturday 8th June designed to engage all those  - public and campaigners alike – who would like to know more about why tax matters to society and, therefore, the need  to intensify the spotlight on tax avoidance.

The day will include two film screenings each with panel discussions, a ‘revelatory’ walking tour of the City of London and a great list of contributors to the day’s events including John Christensen, John Hilary, Nick Mathiason, Nick Dearden, Polly Courtney, Tom Pursey, Pablo Navarette.

Morning film/panel (We’re Not Broke) and the lunchtime ‘secrets of the city’ walk  are both free; Barbican afternoon film ‘Spirit of 45′ & discussion is ticketed.

Find out more and how to reserve here  http://www.tippingpointfilmfund.com/site/news/tax-justice-network-tpff-day/

One of the tedious, and recurring themes, of those who come to this blog to object to what I say is that I sometimes choose not to engage with them, I delete them when I think their comments fall outside my comments policy, or that I am short in response to their comments.

I, unsurprisingly, do not agree with any of those observations. I write this blog pretty much in my own time because I don’t think anyone funds me to wrok at 6am when I usually begin blogging for the day, or late at night when I often finish. And in between I actually do the work I am paid for.

However, it seems that those who complain think I am available at their personal beck and call to debate with them endlessly (and tediously) on issues of their choosing that will not achieve any of their objectioves regarding their opinions which I usually, and I think entirely appropriately, think to be misguided at best.

As a result I have just updated the comments policy which now reads as follows (the changes are in italics) and those who don’t comply can expect the obvious outcome:

———————

Comments are welcome on this blog. However, they are moderated with good reason: far too many received are not suitable for publication.

For a comment to be published I must be satisfied that:

1. It is legal;

2. It is polite;

3. It includes an argument that adds value to readers;

4. It appears factually accurate;

5. The commentator is genuine;

6. It is not questioning the fundamental tenets on which this blog is based.

This last point is important. Those who wish to argue that tax havens / secrecy jurisdictions are good things may do so, but not here. Likewise those promoting neoliberal economics may do so, but not here: propagating the delusion that an economy can be accurately modeled using counterfactual propositions about its nature is not something I wish to partake in, and will not allow.

The following are highly likely to be rejected:

1. Abusive and personal comments;

2. Rants;

3. Repetitive commenting from the same person;

4. Comments that duplicate a theme adequately covered by others;

5. Persistent comments from those promoting libertarian ideals far removed from the political mainstream.

I stress three other things. Firstly, agreement with me is not a condition of a comment being accepted, but disagreement must be reasoned and be offered within the framework of understanding that this blog seeks to promote. This policy is necessary to make the comments section on each blog useful, meaningful and enjoyable for readers.

Second, please do not expect me to:

a) enter into lengthy debate with you. It’s entirely my choice if I wish to do so or not and being rude to me (in a comment, by tweet or in an email) if I have other things to do with my time is unlikely to increase your chance of getting a response;

b) do your research for you. If you want to find evidence for something you can find it as well as I can;

c) reference every comment I make. I have written several million words on this blog. There is no obligation on me to reiterate them for anyone at any time of their choosing.

Thirdly, for those who disagree or think this an act of censorship I have one suggestion to make: please go and start a blog of your own. Free speech is valuable. I support it. It is what permits you to offer your opinion as readily as I offer mine. But nothing requires that I must offer your opinion on my site. To say so is an act of editorial freedom – an issue as important as that of free speech.

Tax-News.com published responses to the news that Austria and Luxembourg had blocked progress on the European Union Savings Tax Directive this week, including this one:

Commenting Chas Roy-Chowdhury, Head of Taxation for the Association of Chartered Certified Accountants, said: “Europe wide and global efforts to crackdown on the illegal practice of tax evasion is a positive step. However, if the sharing of tax information is going to be used for other reasons that aren’t aimed at preventing laws being broken, then we start to get into the realms of ‘big brother.’

“It should, by now, be etched into everyone’s mind that tax avoidance is within the law, while tax evasion is illegal. If the sharing of tax details amongst EU states of individuals and companies is going to be used for something other than tackling tax evasion, such as a shaming exercise for those who operate well within the law in order to pay less tax, then the EU risks becoming a no go area for the world’s business community.”

First, tax avoidance need not now be within the law. The General Anti-Abuse Rule has changed that. Roy-Chowdhury is wrong, and I strongly suspect he knows that.

Second, this is the most extraordinary insinuation. What else would information exchange within Europe be used for but tackling tax evasion? No explanation is given: if he does not know that the European Union Savings Tax Directive goes nowhere near big business he is even more misinformed, and I doubt that.

In that case what we have is, in fact, an official spokesperson for the ACCA who thinks he can on behalf of the tax profession seek to oppose measures intended to stop tax crime by the use of complete misinformation and insinuation for which there is not a shred of evidential support.

The only obvious conclusion is that the ACCA is willing to use misinformation to oppose measures intended to capture those committing tax crimes.

The Conservatives really said that. In 1950. In their election manifesto.

How far they have gone in the wrong direction since then.

It is impossible to believe a Conservative would say that now.

I’ve been asked to suggest how we could stop Google, Amazon and others beating the UK tax system, as they beat many of the tax systems around the world. One answer is unitary taxation.

In December the Tax Justice Network published a paper by Sol Picciotto explaining unitary taxation. Amid rising public concern at how multinational firms ride roughshod over international tax rules, the paper advocated a shift to a system unitary tax system because under this approach the global profits of a multinational are ‘apportioned out’ to countries according to the genuine economic substance of what it does in each place. Each country can then tax its share of global profits at its own rate.

Not everyone agrees, of course, so another paper, also written by Prof. Picciotto has answered ten criticisms of the approach.

What’s important about all this? Well, it shows we don’t have to put up with corporate tax abuse. There are alternatives. And the fact is, those alternatives would work. That’s why we promote them.

The question is, why isn’t the idea getting the support it deserves?

I was listening to Radio 4 business news at 8.45 this morning on my way to the station. Because of poor reception I could not hear whowas being interviewed. What I do know is that they argued that we will, over the next 25 years, have to accept that parochial national governments will have to give up trying to regulate or govern large multinational companies to whom the power in the world is passing.

With the very greatest of respect to whoever spoke, this is a description of the path to fascism – to the corporate state.

It is an argument that democracy is dead.

It is an argument that the 1% must rule.

And let's be candid: we do not have to accept this. Not in the slightest.

My own contribution to the fight against this form of fascism is country-by-country reporting. That would make global capitalism accountable locally. That is its most important goal. It is part of a fight against the rule of global capital.

But note that Ernst & Young, PWC, the CBI and others fight country-by-country reporting. It's safe to say that they are on the side of global capital defeating democracy. And I defy them to say otherwise.

Best quote of yesterday was Margaret Hodge:

‘I think that you do evil’

But run close by Anna Walker of UK Uncut:

“The government talks tough on tax, but does not do much”

Whilst Lin Homer of HMRC picks up worst of the day, for the sheer arrogance and inability to comprehend what’s needed that it reveals:

“We see – but understand more fully – some of the information that might seem to the general public to be surprising.”