Feb 22 2011

The Barclays stuff, and the problem with budgets

Posted by: Nick Shaxson in: Thoughts

Brilliant work, once again, by UK Uncut (I’m a bit behind the times; I’ve been away from work for a little while). I’ve now met a couple of their shakers – both inspiring, each in their own very different way.

They reminded me of a problem that has faced the Tax Justice Network since the beginning: the problem with budgets. Budgets have two sides, of course: on one side, you raise your money, and on the other side, you spend it. It’s relatively easy to get people out into the streets when there are cuts on the spending side: when that hospital closes, you will get patients and staff coming out to try and express their outrage.

But tax? That’s where the problem comes in. The effect of a 1p or 1 cent rise in taxes, or a particular corporate tax dodge, is harder to get people out in the streets for than, say, if the protest is a bout of spending cuts that may have a similar overall impact. This is because the tax cuts or dodges or whatever will generally be spread over the full population, meaning that any given individual won’t feel it as a massive hit. Unlike the closure of a hospital. So that’s one reason (along with all that complexity in tax) why it’s so much harder to get people out into the streets for tax.

Which is what makes UK Uncut so special. They have hurdled elegantly over that gigantic obstacle, primarily by yoking the tax protests to the spending side wherever possible. UK Uncut is looking at Barclays’ shocking 1% tax bill and then looking at planned cuts to schools, leisure centres, libraries, and so on. As the Guardian reported:

“Ruth Griffiths, 36, a UK Uncut supporter, said: “Today we are transforming the banks into schools, leisure centres, and libraries and forests, because it’s society that’s too big to fail, not a broken banking system.”

Indeed. Joined up thinking, when it comes to budgets. And hence the movement’s success. As the individuals I met the other day mentioned, it’s essential to build events that focus around things that people can get their heads around.  And they are very good at that.

There’s something else. I was chatting to a television producer the other day, who had something unusual to say about UK Uncut. I was mentioning how surprised I was that the BBC had covered the protests so little, relative to other media outlets. He said – and I got the impression that this was based on years of experience in the field – that the reason was probably because BBC executives, while making this decision, would be asking the question ‘who do these people represent, and where is their mandate to protest?’ or something along those lines. And here we get back to the same question: cuts (where it’s pretty clear who  protesters represent and their mandate) versus tax shenanigans (where the issue of representation is more complex and distant.) I am not sure if this person’s view of the BBC is valid or not, but it seems plausible (comments welcome). In any case, the movement is getting some BBC coverage now.

One other thing that’s worth mentioning. First, note the Barclays 1% figure, for the spin and the trick  behind the headline number. Barclays’ chief Bob Diamond had tried to tell the UK Treasury Select Committee that Barclays had in fact paid £2bn in taxes to the UK revenue authorities, instead of the £113m it was actually discovered to have paid.

And the reason for the discrepancy? Step forward PriceWaterhouseCoopers LLP (“a Delaware limited liability partnership,” which may make readers of Treasure Islands chuckle) and its Total Tax Contribution framework.

It’s what is called Taxwash. Read more about that here. The media falls for it all the time.

8 comments so far

Bolo 2rd February, 2011 1.20 am

It’s not so much a tax wash as complying exactly with tax law

The Guardian has been absolutely shameless in its reporting of this.

See:
http://www.fcablog.org.uk/2011/02/the-five-howlers-made-by-the-guardian-in-reporting-tax-paid-by-barclays/

and

http://timworstall.com/2011/02/20/ukuncut-blithering-idiots-once-again/

Nick Shaxson 2rd February, 2011 12.35 pm

There are problems with the reporting, but only up to a point. The point of blogs like those, highlighted above, is that they always try to paint a picture — often in sneering language — of companies that are squeaky clean when it comes to paying taxes and not worth protesting about – when in fact they demonstrate absolutely nothing of the sort.

Barclays does pay more than 2% on its profits but it does for sure have umpteen tax avoidance schemes going – it is dodging taxes, big time, legally it seems, and that’s wrong and worth taking to the streets for. Oh, and then there’s this
http://treasureislands.org/uks-implicit-bank-subsidy-cost-of-nhs/

Bolo 2th February, 2011 1.45 am

Ignoring the hypocrisy of The Guardian, the fact remains that Barclays have done nothing illegal. Tax avoidance is not the same as tax evasion. You might not like the system but you can’t blame Barclays for minimizing their tax bill. It’s the same as claiming back VAT.

That there is a difference in the amount of tax they pay and what you would like them to be paying is irrelevant.

I’m no fan of the financial elites of this world, but stuff like this is amoke and mirrors. The issues stretch much further and deeper than bankers bonus and banks tax bills. Frankly we should be getting them to pay out bigger bonus’ because it’s far easier to collect your 50% tax from them than forcing banks to re numerate their employees in more secretive, underhand ways

Bolo 2th February, 2011 1.46 am

I’m gonna buy your book by the way! Sounds very interesting

Nick Shaxson 2th February, 2011 9.58 am

Bolo, thanks. You will find, contrary to the assertion of some reviewers who haven’t read my book properly, that I discuss the difference between avoidance and evasion in detail in my book. Avoidance, by definition, involves getting around the spirit of the law, and it is harmful. Take a look at the arguments here. http://treasureislands.org/the-arguments/

And on the alleged hypocrisy of the Guardian, this in no way changes the arguments. And you might want to read this
http://www.guardian.co.uk/help/insideguardian/2011/feb/22/blogpost
“If the argument is that no one should write critically about tax avoidance unless they can show total purity in all their dealings and investments, both personal and corporately, then the probable blunt truth is that not a single journalist would be able to write on the subject.” So what are you arguing for bolo – self-censorship, on account of what the business side may or may not be doing?

Christie Malry 3rd March, 2011 8.22 pm

Nick

I’m no apologist for Barclays. I want them to pay the right amount of tax just as you do.

Unfortunately, the facts behind the “Barclays pays 1% tax” story do not support the hypothesis that Barclays is a dirty tax avoider.

Now, perhaps there’s more evidence to suggest that, in fact, they are. In which case, it’s not unreasonable for sceptical bloggers like me to ask two things:

(1) Let’s see it; and

(2) Don’t you think the tax justice campaigners’ credibility is tarnished by making such a big deal out of facts that patently do not support the hypothesis that Barclays avoids tax?

As for the Guardian, if the fact pattern behind Barclays is indeed considered prima facie evidence that Barclays avoids tax (and clearly some people at the Guardian thinks it does), why does the Guardian undertake behaviours that it believes to be tax avoidance?

Nick Shaxson 3th March, 2011 12.27 pm

Perhaps ffair enough on the Barclays numbers – I don’t know the ins and outs because I haven’t researched them in detail myself. Certainly, people do need to be careful. However, this is a very, very slippery area – and it is usually possible for any given tax position to be defended on the basis of ‘this is the tax we are legally due to pay, so that’s alright then.’ which, as anyone who follows the debate knows, isn’t the case at all. So the Barclays protestations need to be doubted – especially, especially in light of all the taxwash being created by PWC and the users of its Total Tax Contribution framework.

As regards the Guardian, I am just so tired of this argument. Are you seriously – seriously – suggesting that Guardian journalists should subject themselves to self-censorship because of what the business side may or may not be doing? The Guardian argument, whatever its merits or not, does not change the facts on the ground one bit. So bringing up the GMG stuff is quite pathetic, in my admittedly jaundiced view.

Don’t like the message? Shoot the messenger. C’mon, you can do better than that.

Not in Financial PR 3th March, 2011 5.14 pm

Bolo is a an employee of a financial pr company retained by Barclays. Bolo is a small part in a co-ordinated damage-limitation internet campaign financed by corporate tax avoiders.

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