The UK’s HM Revenue & Customs reacted to criticisms from the Tax Justice Network made by John Christensen when he spoke to the Royal Geographic Society last week. According to reports in the London Evening Standard (and I’m sorry, due to my internet access problems I can’t provide a link) they have said that the criticism was unfair. They have said that since 2004 they have required the reporting of tax planning by individuals and corporations and that this has been part of a concerted attack by them on tax abuse.
That is true. And, they know, we have welcomed such actions on their part, more enthusiastically than most. But in making this comment they have either accidentally or deliberately missed the point John was making. Such action on their part tackles specific failures within the tax system. What John was talking about was systemic failure of the tax system. And that’s quite different.
Whilst HMRC is doing a good job on the specifics we do have considerable problems with the UK’s attitude towards tax systems. Which have emanated from the Treasury (HMRC’s very close neighbour in Westminster). To give examples of systemic failures to which the UK has contributed:
- The UK has persistently objected to routine tax deduction at source within the EU, requiring instead information exchange. This is because of its commitment to London’s activity as a tax haven at the centre of the Eurobond market. The EU Savings Tax Directive is the result, and has not met expectations.
- We believe that the EU STD has in no small part failed to meet expectations because the UK allowed it to be created with the EU thinking that it applied to trusts, to which the UK then objected saying that could not be the case. This deliberately holed the EU STD to reduce its effectiveness in direct support of the massive trust business run from Guernsey, Jersey, the Isle of Man and other UK Crown Protectorates and Dependencies. We consider this was unacceptable.
- We have major reservations about the UK’s role in managing the EU Code of Conduct on Business Taxation where we have little doubt that ‚Äòlook through’ taxation in the Crown Dependencies was given discreet encouragement from Whitehall who passed none of such plans on to Brussels, who was vehemently opposed to them, despite the impression given to the tax havens that Brussels had been informed. The result has been confusion, and an environment in which an appropriate challenge to tax abuse has become an opportunity to introduce 0% corporation taxes. We are happy to have played a role in killing ‚Äòlook through’ taxation in Jersey and Guernsey.
- The UK has taken no action to stop the flagrant abuse of international taxation rules that its domicile rule represents. It remains on of the more blatant tax havens for the mega-rich as a result. Gordon Brown has, to put it quite simply, failed in this respect and we think it right to say so.
- The UK is refusing to take an active part in creating a common EU tax base for multinational companies. It is hard to see what benefit it thinks accrues from this course of action on its part when the administrative burden of tax is likely to fall as a result, the opportunities for cross border abuse will be reduced and the yield is likely to rise in consequence. And yet it persists.
We could go on. But this is evidence enough. The UK’s HMRC is doing a good job in tackling the specific issues, but we have no doubt that the mind set of the Treasury remains committed to a taxation environment which encourages high level abuse. This is what has to change. That is what we are talking about.