Dec 06 2011

Corporate tax: UK unveils yet another offshore disgrace

Posted by: Nick Shaxson in: Thoughts

From the Financial Times, a completely one-sided article by Vanessa Houlder, who increasingly risks being tarred as a cheerleader for tax havens:

The Treasury plans to slash the red tape faced by multinationals, in what is viewed as a key test of George Osborne’s bid to make the corporate tax system the most competitive in the G20 group of nations.

That weasel word ‘competitive’ again – what an absolute, complete nonsense it is. I eviscarate these kinds of arguments in Treasure Islands, and reveal the economic illiteracy of using the word in this particular sense. Some explanation, now:

In an overhaul of anti-avoidance rules to be unveiled on Tuesday, the Treasury is expected to say that companies’ offshore operations will now only be caught by the British tax net in “situations that pose the highest risk of artificial diversion of UK profits”.

In other words, just get on with using tax havens, and unless you are stupid we will leave you to get on with it. As for ordinary taxpayers – well, you can pick up these corporations’ tax bills on their behalf. And then:

The decision to exempt other situations comes after a consultation in which businesses said that increased compliance burdens might deter groups from basing their headquarters in the UK.

No, that was not a consultation. That was a case of carte blanche given to corporations to write the UK tax laws, without any consultation from the ordinary taxpayers affected by those laws. Here is Richard Brooks in the UK parliament in January explaining an earlier iteration of these broad moves:

The whole process has been overseen by a “tax and competitiveness group” comprising the finance or other directors of Vodafone Group plc, Diageo plc, RSA Insurance Group plc, GlaxoSmithKline plc, Rolls-Royce plc, General Electric Company, Ford Motor Company, Amey plc, Royal Dutch Shell plc plus the director of the business-funded Oxford University Centre for Business Taxation and the Director-General of the CBI. Again, the companies mentioned stand to gain significantly from the changes proposed.

Conflicts of interest, corporate writing of tax laws, the expansion of Tax Haven UK – that is what is going on here. (And in case anyone is in any doubt about the Oxford University Against For Business Taxation, read this.) Read more about those earlier moves here. As the expert Progressive Tax Blog noted at the time:

“every other UK multinational that had no intention of leaving the UK is ecstatic.”

John Christensen, director of the Tax Justice Network, said this of the latest moves:

“this is an absolute disgrace – the British Chancellor handing the keys of the tuck shop across to big business and told them to help themselves.  They will now gorge themselves.”

These moves will have a huge impact, not just in the UK where corporations will have even more room to wriggle out of their tax bills, but for the rest of the world whose taxpayers will be roundly abused by tax-dodging multinationals.

Now let’s translate another sentence from the FT, to reveal its real meaning.

[UK rules] have become increasingly unpopular with businesses as they impeded tax-efficient financing of overseas operations


[UK rules designed to stop offshore tax abuse] have become increasingly unpopular with businesses as they impeded tax-dodging.

There is an abject capitulation to offshore going on here – and not a single dissenting voice, anywhere? In this day and age, it won’t do any more to have articles as one-sided as this from the Financial Times. There are (at last) people to consult who can put the other side of the story.

Postscript 1: on a brighter note, we are more pleased to see this – albeit not from Revenue and Customs, but from parliament.

Postscript 2: we are delighted to see this, from the British Chancellor.

George Osborne is set to announce that even properties bought through offshore companies will be subject to 5pc stamp duty, rather than 0.5pc rate they can currently pay.

That is progress. I think that John Arlidge of the Sunday Times should take some credit for this.

Postscript 3: this one looks to be another awful coddle-the-oligarchs move:

Tax charges for non-domiciled investment in UK business are expected to be reduced – from the current 28% rate for capital gains and 50% income tax rate – to zero.

Postscript 4: I don’t know what this is all about, but it looks interesting and on the face of it, promising:

The Treasury is also planning to tighten the definition of a “non-resident” to clamp down on the wealthy who live, work and own businesses in the UK but do not pay full taxes.

one comment

Strategist 12th December, 2011 12.59 am

Nick, I do hope you’ll blog something soon about the astonishing state of affairs that Cameron appears to be going into the EU Summit with one demand only – that unless the City of London is exempted from the Financial Transaction tax (which I take to be exactly the same as the Tobin, or Robin Hood, Tax?), then he will block all and any attempts by the Eurozone to do what they think they need to do to shore up the euro and stop an immediate credit crunch which will send the whole continent into recession.

Now I totally agree that Merkozy et al have got it all wrong on austerity, but this is an extraordinary position for Cameron to adopt. It utterly abandons the British national interest, which is that the grotesque excesses of computerised millisecond by millisecond trading be tamed and achieve some social & economic benefit by being taxed a little (and obviously that there is no new credit crunch), in favour of defending at all costs the greed of the City. What greater proof of the utter capture of the highest levels of the UK Government by the financier interest could be observed?

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