2011 December » Tax Research UK

From the Guardian letters page this morning – action is needed on tax

Dec 222011

The following are on the Guardian letters page this morning. I am a signatory to both:

The public accounts committee’s report into HMRC‘s tax settlements made for compelling reading (Revenue hid ‘sweetheart’ tax deals for big business, MPs say, 20 December). But more fascinating was the feeble response by HMRC and the striking lack of response from either Vodafoneor Goldman Sachs.

Gone are the days when HMRC and Vodafone would come together as an unstoppable dream team proffering denials of tax avoidance as an “urban myth”. Now, we see HMRC weakly saying the committee is misinformed and is basing its conclusions on partial information. We know that the committee did everything in its power to get to the truth, but HMRC obstructed the inquiry by using the veil of secrecy that is taxpayer confidentiality.

It is imperative that the UK’s political and business culture changes so that rich individuals and corporations treat tax avoidance as taboo. It is also crucial that the culture at HMRC changes so that it clamps down on tax avoidance. If this were the norm, the UK could raise sufficient income to protect the services currently under threat from cuts, set an international standard for tax justice, and make progress towards achieving equality in the UK and around the world.

So while we support the efforts of the public accounts committee, we also support the action by UK Uncut Legal Action to challenge HMRC in the high court so that the decision to let Goldman Sachs off its unpaid tax is declared unlawful and the £20m is given back to the taxpayer. It is undeniably in the public interest that this case should go through the courts in order to ensure transparency, accountability and fairness.

Katy Clark MP, Virendra Sharma MP, Jeremy Corbyn MP, John McDonnell MP, Caroline Lucas MP Jonathan Edwards MP, Diane Abbott MP, Paul KennyGMB, Mark SerwotkaPCS, Christine BlowerNational Union of Teachers, Len McCluskeyUnite, Nicholas Shaxsonauthor of Treasure Islands: Tax Havens and the Men Who Stole the World, Richard Murphy, Tax Research, Clifford SingerFalse Economy,Neal LawsonCompass,Greg MuttittWar on Want, John ChristensenTax Justice Network

And:

• We would like to thank you for highlighting the disgraceful treatment of Osita Mba, a personal friend, whose whistleblowing on a deal between HMRC and Goldman Sachs has earned him not praise but disciplinary action and the threat of losing his job and/or prosecution (Report, 15 December).

Without protection, whistleblowers will be reluctant to come forward and divulge information that is in the public interest. We have collected more than 7,300 signatures in a petition in support of Osita and the important role whistleblowers play in serving the public interest. As one of our petition signers, Ben Tisnell, states, “Whistleblowing is a courageous act of public service; those exposing wrongdoing should expect protection in any civil society.” We firmly agree with his view – whistleblowers should not face condemnation but should be protected.
Kerry-Anne Mendoza, Katherine Segal, Maria Murselland 7,300 others

Please support both actions this Christmas. They’re about your freedoms.

Zero Ten isn’t a success for Jersey – it’s an outright disaster for the people of the island

Jersey 2 Responses »

Dec 212011

The EU has approved Jersey’s zero – ten tax regime.

This is not, of course, the regime I said would fail: they had to amend it time and again over the last six years as time and again the EU ruled I was right on zero – ten and Jersey was wrong, but crowing they are none the less:

THE road leading to the approval of the Island’s zero-ten business tax system has been long and occasionally rough. It has also been lined with commentators eager to insist that the formula would fail to meet criteria of acceptability set by the European Union.

Finally, however, the EU has confirmed that zero-ten now meets the requirements of the code of conduct designed to stamp out harmful tax practices and the critics have been confounded.

Except we’re not confounded: very far from it. Although I raised one last doubt about this latest version it was clear Jersey was likely after changing the scheme so many time going to get it through. And the victory for Jersey is pyrrhic. As Deputy Geoff Southern of Jersey has noted, the cut in corporate taxes that zero-ten delivers is at cost to the ordinary people of Jersey. As his amendment to the revcent Jersey Budget said:

So what the Jersey Evening Post and the elite of Jersey are celebrating are their ability to exploit the people of Jersey to support the finance industry and the tax cheats from other countries that they serve.

Some victory.

And I’ll conclude with a quote from Simon Jenkins, who is no left winger, in the Guardian today:

Osborne is the scourge of public sector unions and condemns tax avoidance, yet he refuses to end the scandal of crown tax havens, from Jersey to the Caymans, that enjoy the benefits of British citizenship while enabling individuals and corporations to evade British tax.

What’s been the success of the campaign against Jersey? To make people like Jenkins realise what a sordid, nasty place it is run be people who are dedicated to destroying democracy and the well being of people around the world.

And we’ve won. Confounded? Not at all. But Jersey will be when, as I’ve said so many times before, it runs out of money as its zero-ten policy leads to its economic ruin because the model Jersey’s pursuing now is utterly unsustainable.

Simon Jenkins on tax justice

Cayman, Jersey, Tax Havens, Tax justice 8 Responses »

Dec 212011

A decade ago an article like this would not have happened.

It does now.

Don’t say changing moods is not possible.

This is Simon Jenkins in the Guardian today (edited, of course):

Osborne is the scourge of public sector unions and condemns tax avoidance, yet he refuses to end the scandal of crown tax havens, from Jersey to the Caymans, that enjoy the benefits of British citizenship while enabling individuals and corporations to evade British tax. Last week the European Union lectured Britain on financial regulation, while harbouring on its borders such fiscal black holes as Monaco, Liechtenstein and Switzerland. The thesis, accepted by governments of all parties, that the rich should be allowed to escape tax for their “wealth-creating potential” has surely been exploded by the credit crunch. It is not the kind of wealth Britain can afford. If Goldman Sachs dislikes paying British taxes it should go to Dubai, not just the first-class lounge at Heathrow.

The control of public expenditure is never perfectly equitable. It is war by other means. But when large sections of the public are being asked to bear the burden of cuts in their standard of living – largely through the action and inaction of government – they are entitled to see at least a semblance of fair play.

Just because lobbyists say bonuses and tax havens are “essential to Britain’s recovery” does not mean they are. The government’s tolerance of both is more than stupid. It induces cynicism in the public realm and recruits fair-minded people to the cause of St Paul’s protesters and public sector strikers. Nothing is more crucial to national wellbeing at a time like this than a sense of equality of misery. The British government derides Greece and Italy as countries where taxpaying is “voluntary”. It appears to be voluntary in Britain too.

He’s right.

Creating this awareness has taken a lot of effort. Now we need action to address the issues. When will people get serious about the Tax Gap? It’s entirely possible to do so. But only the Greens take it seriously as yet. That’s to their credit, and none to anyone else.

On secrecy and its dangers

Ethics 14 Responses »

Dec 212011

This is extraordinary:

The very word “secrecy” is repugnant in a free and open society; and we are as a people inherently and historically opposed to secret societies, to secret oaths and to secret proceedings. We decided long ago that the dangers of excessive and unwarranted concealment of pertinent facts far outweighed the dangers which are cited to justify it. Even today, there is little value in opposing the threat of a closed society by imitating its arbitrary restrictions. Even today, there is little value in insuring the survival of our nation if our traditions do not survive with it.

It was J F Kennedy in 1961.

He also said:

It requires a change in outlook, a change in tactics, a change in missions–by the government, by the people, by every businessman or labor leader, and by every newspaper. For we are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covert means for expanding its sphere of influence–on infiltration instead of invasion, on subversion instead of elections, on intimidation instead of free choice, on guerrillas by night instead of armies by day. It is a system which has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations. Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed.

He wasn’t talking of neoliberalism, of course. But he might as well have been for this is the threat we face: the threat the 1% create through the use of tax havens, the media and the instruments of power to oppress.

And yes, we do need that change in outlook, very badly.

Hat tip: Larry Levin

One for your new year diary

Economics Comments Off

Dec 212011

SOCIAL DEMOCRACY AND EUROPE’S CRISIS

Thursday 16 February 2012, 6p.m.

Room B33, Birkbeck College, Malet Street, London WC1E 7HX

The financial crisis, the subsequent economic crisis and the crisis in the Eurozone have multiple facets that highlight and, in some respects, exacerbate social democracy’s malaise. They are crises of values, programmatic beliefs, policies, leadership and institutions. They raise in the most pressing manner the issue of the real contemporary meaning of reformism, internationalism and solidarity, the relationship between the political sphere and the economic sphere, the boundary between the public and the private, the appropriate level(s) of action (national, European, global), and the search for leadership and effective institutions. However, the ongoing crisis is above all a crisis of neo-liberalism and not enough (as well as a particular kind) of Europe. Yet, it was the Centre-Right and its allies that won the 2009 European elections. Crucially, they did so on the basis of a theme and slogan with clear social democratic overtones: to help create “l’Europe qui protège”.

What lessons have Europe’s social democrats drawn from this ongoing crisis and, above all, how would they deal with it? What are their proposals and their strategies in that respect? How do they propose to meet the challenge of building the broad alliance that would enable them to return to power and what is to be done if they succeed? The purpose of this event is to bring together speakers from a range of spheres and offer them a chance to begin to sketch out current social democratic thinking at both the national and the European level on the crisis in the Eurozone and the associated ensemble of issues, including the regulation of financial services and the demand for the explicit politicization of the European Union. Is more integration the answer and if so, what kind of Europe should emerge from this crisis? How can democratic politics be brought to bear on unfettered markets and what is the appropriate level of action?

Chair: Dr Dionyssis G. Dimitrakopoulos (Birkbeck)

Speakers:

Lord Wood of Anfield (Member of the Shadow Cabinet, Strategic Adviser to Ed Miliband, Tutorial Fellow in Politics, Magdalen College, Oxford)
Michael Dauderstädt (Director, Division for Economic and Social Policy, Friedrich-Ebert-Stiftung)
Will Straw (Associate Director, Institute for Public Policy Research)
Richard Murphy (Director, Tax Research LLP and founder, Tax Justice Network)

The event is supported by the Birkbeck Institute for the Humanities, the London Office of the Friedrich Ebert Stiftung, and the Department of Politics at Birkbeck College, University of London.

Registration is free but required. You can register here.

Time for corporation tax returns to go on line

Ethics, HMRC, Tax justice Comments Off

Dec 212011

There’s a fascinating editorial in the FT today. It says:

The need for austerity has forced the government to increase the burden on British taxpayers. At such times, the public must have confidence in the fairness of the tax system. Not only should tax justice be done; it should be seen to be done.

Some of us have said that for some time. Good to see they’ve signed up.

They continue, having reviewed the Parliamentary Accounts Committee report:

While HMRC accepts that it could tighten governance – for instance, dividing the negotiation and separation of settlements, and bringing in an independent assessor to look at deals – there is a case for going further. There are good reasons why everyone should not be able to pick through every individual’s tax returns, but it is weaker in the case of companies (where there is also a greater case for scrutiny given the heftier clout such corporations wield).

Given the complexity of tax, public disclosure of returns may be an ineffective tool. A better way forward might be to require all settlements over a certain threshold to be blessed by a judge before becoming effective. This would preserve flexibility for the taxman, while making sure that the public interest is not left outside the room when deals are cut.

Note they only say that public disclosure of tax returns ‘may be’ an ineffective tool. The possibility that it may also be an effective tool has by default been admitted by the FT as a consequence.

I tweeted that suggestion last night. My friend and colleague Prem Sikka has long argued for it. I think such disclosure a corollary of the right to limited liability – which demands transparency in exchange for the privileges granted.

Without diminishing the suggestion made by the FT of a judge led reviews, I think tax returns on line should happen.

More than that, I think companies should also, as I suggest in the Code of Conduct I have republished today, be required to disclose their tax planning explicitly and all their accounting entries for tax. That would really change the scene, and much for the better. Why so? Because most tax planning is not in the interest of shareholder’s as it misallocates resources within corporations to their detriment. It’s actually designed to trigger executive share bonus schemes – and those are now severely discredited. So the tax planning that drives them should be exposed.

Supply side reforms just don’t work when it comes to creating jobs

Economics, Labour 1 Response »

Dec 212011

As my TUC colleague Nicola Smith has noted on the Touchstone blog:

New data on the operation of the Government’s National Insurance Holiday Scheme has now been laid in the House of Commons library. When this scheme was announced, it was estimated that over three years 400,000 new businesses would benefit by having a lower tax bill from employing new staff and that 800,000 new jobs would be created.

Today’s data reveals that over the first year of its operation 3,345 employers have taken advantage of the scheme (1% of the total anticipated number) and that the NICS holiday has been claimed for 12,411 employees (2% of the anticipated number of jobs).

What’s more in the region that currently has the highest unemployment rate (the North East where unemployment is 11.7%) only 587 employers have used the scheme, supporting 571 jobs. To put this in some context over the same period of time the unemployment level in the NE has risen by 24,000 and the employment level has fallen by 23,000.

Far from “ensuring all parts of our country contribute to a more balanced and sustainable economic future” this scheme has created barely no jobs – as we predicted at the time. But with unemployment now at 2.63 million there is no pleasure in saying we told you so.

Supply side reforms like this – where the rules are changed to supposedly encourage work – simply don’t work.

There is only one agency that can create the jobs this country needs now – and that is the government. I know there are those in Labour who oppose such moves – calling for fiscal conservatism and so the inevitable ascendancy of the 1% – but they have to be ignored.

On messaging no is the time for Labour to talk of the Tax Gap.

And on policy now is the time for Labour to prepare for the spending needed to deliver a Green New Deal. Nothing else will do. What is more, nothing else but job creation will reduce the deficit.

What baffles me is why it is so hard to message that point.

Sky, yesterday

HMRC, Tax Justice Network 8 Responses »

Dec 212011

I’ve just discovered my broadcast on Sky yesterday morning is available on the web, here.

Live from my Downham Market studio! Good job the camera didn’t sweep round the room or it would have landed on the model railway that my sons and I share that I happen to share my work space with.

The way to solve the crisis at HMRC

HMRC 4 Responses »

Dec 212011

This is from the Channel 4 web site, and yes, I am the Mr Murphy in question:

Following the outcry over the PAC’s report, Mr Murphy thinks there needs to be a shift in attitude at HMRC: “The only way to change this culture is to change the board of directors and include more people who know about tax and are not connected to big business.”

Mr Murphy’s suggestion as to how to tackle tax avoidance and evasion was echoed by Graham Black, president of the Association of Revenue and Customs, the union representing senior HMRC professionals. He said: “The problem is not that tax inspectors are ‘too cosy’ with large business – it is that there are not enough tax professionals in the department to tackle the scale of the tax being lost.

Mr Black added: “Senior staff strive constantly to treat all taxpayers fairly, but resources are too stretched to battle the major companies advised by an army of expensive advisers.

“The attacks on HMRC officials have at times been overly aggressive, these are public servants carrying out important and difficult jobs. The real problem has been with successive governments cutting the country’s only money-generating department.”

Quite so.