We must not be fooled by the coalition’s rhetoric on tax avoidance


Richard Murphy is the founder of the Tax Justice Network

After a decade of campaigning for senior politicians to take tax avoidance seriously I am obviously delighted we now have three come along at once. The prime minister, deputy prime minister and chancellor have all announced this is a top priority for them.

taxThe trouble is that in this case, like three buses together, they might all have the same route number displayed, but the drivers seem to have little clue where the destination might be.

Cameron’s language, in particular, was robust throughout January, in both press conferences and at Davos.

He was emphatic: on 4 January it was reported that the prime minister was going to make ‘damn sure’ that foreign companies like Starbucks and Amazon, which have been found to avoid legally paying a large corporation tax in the UK, paid their fair share.

In February that language changed, considerably. It was reported Cameron had said in India: “I think the problem with that is that there are some forms of tax avoidance that have become so aggressive that I think there are moral questions we have to answer about whether we want to encourage or allow that sort of behaviour.”

That language was much more nuanced than that in January; the word ’aggressive’ has now been added to the lexicon.

In addition he added “Some would say: ‘Well just keep changing the law to make the aggressive avoidance illegal.’ But with respect to many friends in the accountancy profession  it is difficult to do that. So there is a legitimate debate to say very aggressive forms of avoidance are not appropriate.”

But what does that mean? First, has Cameron now realised (or been told, as he had clearly not been in January) that the government’s proposed General Anti-Abuse Rule goes nowhere near tackling Starbucks, Amazon and Google (as I can assure you as a member of the committee tasked with assisting its implementation is the case).

Has he as a result backtracked, adding the word ’aggressive’ to his lexicon to limit the range if issues he has addressing?

Has he also limited his ambition? Is he moving from being ‘damned sure’ to imploring changed behaviour by suggestion of mere moral sanction?

It’s not clear, but George Osborne has provided a better indication. In his Observer article on 17 February, he suggested a range of measures he would take to tackle tax avoidance, with an emphasis on abuse in developing countries.

However, as I have argued, he added nothing new to his range of weaponry when making his claim that he was serious about tackling tax avoidance; indeed every single measure he referred to already exists or is in the course of being enacted.

All this should also be set against the background of the harm this government has already caused in degrading the corporation tax system domestically and internationally, as well evidenced by the House of Commons International Development Committee in 2012.

It is hard to see how any steps Cameron and Osborne can now take will reverse the impact of the measures they have already enacted to overtly assist  tax avoiders.

The simple fact is that the rhetoric Cameron started is little more than that. So far the Coalition has done more to help corporate tax avoiders than any government since corporation tax was introduced in 1965 and nothing now announced will change that.

In that case we need to be careful. Cameron and Co. may know much more about what they’re doing than they let on.

Indeed, their rhetoric may be as far removed from the reality of what they’re seeking  to achieve as the average tax avoidance scheme is from economic reality. If we don’t presume that’s the case they might be playing a good game of double bluff. We mustn’t take the risk of being fooled by that.

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  • LB

    Lets be clear. Higher taxes means higher prices and/or lower pensions for people saving.

    So if you want to tax turnover, raise VAT to 50%. Be honest.

  • LB

    Anti-Abuse Rule goes nowhere near tackling Starbucks, Amazon and Google

    ==============

    Because they aren’t abusing the tax law. So long as the royalties are consistent across all countries, there’s nothing you can do about it. Unless you can suggest a law that does.

    If you increase the taxes, then prices go up. Nothing like kicking the consumer is there.

  • Newsbot9

    Yes, I’m sure you want far higher regressive taxes.

  • Newsbot9

    Except, of course, they are. Keep standing up for not paying your tax! And oh yes, you’d know all about that, syphoning off untaxed profits for your frauds.

  • James

    This is one of the biggest questions of the coming decade – how to properly tax corporations in a global environment. How do you decide what portion of the profit is created in any given country. As long as their are countries willing to lower their tax rates to attract investment, you will have multi-nationals relocating profits to these countries.

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