According to the Guardian David Cameron is seeking to deflect attention from his own tax affairs by introducing a new law that will make companies criminally liable if they fail to stop their employees from facilitating tax evasion.
Call this the HSBC law if you like, but I suspect it is not that, and I very strongly suspect that this law, if it is enacted, will never be used and be quite incapable of use for three very good reasons.
First, the crime of tax evasion will not take place in the UK. It will be exceptionally difficult to prove liability in many cases as a result.
Second, the defence to the crime will be that of Mossack Fonseca, who made it clear (as does almost every offshore operator) that they are not responsible for the use their clients make of the facilities that they create for them.
Third, because offshore works by referring one person to another, to another, in a web of layers of opacity proving who facilitated evasion will be nigh on impossible.
The result is that we will have a law of little consequence only of use for targeting the activities of small limited companies where the owner/director knowingly pockets cash. Whilst that is a big issue that is not the issue of the moment.
Cameron knows that. And I am sure that he knows this law will be useless.
There is, however law that would be immensely useful. That would be the legal requirement that all multinational corporations - without exception, regardless of size - publish country-by-country reporting data to show just where they are and what they do in every place where they trade, including tax havens.
The EEU parliament demanded parliament demanded such a requirement of the EU Commission late last year and the EU began a review of such a requirement. However, only a couple of weeks ago it was reported that the EU's plans have been massively curtailed. The requirement will only be for disclosure within the EU, leaving the rest of the world and as a result the vast majority of tax havens out of any scrutiny, whilst the rule was only to apply to companies turning over more than €750 million, leaving most companies out. The result is a hollowed out and meaningless gesture that will achieve almost none of the goals of proper country-by-country reporting.
If David Cameron wants to back something he has to demand full country-by-country reporting on public record now. Then we will know those companies who are really making use of tax havens and who, by their actions, fund the infrastructure of these places that is also, whether they are aware of it or not, used for illicit activity.
David Cameron's new law will be a meaningless gesture. Country-by-country reporting would really change corporate behaviour. By his choice will you know him.
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At the margin do you not need to define tax evasion before you can have a law against it?
These schemes are rolled out based upon one counsel’s opinion that they are legal only to fail at a later stage.
And tax avoidance?
Absurdly journalists have been comparing the use of ISAs and the 7 year rule with secretive, offshore vehicle creation obcured by bearer certificates.
For me we have to look at the intentions of parliament and the subsequent interpretation of the laws passed by parliament. You dont need a tax judge to tell you that these schemes abuse the intentions of Parliament.
Parliament intended people to use ISAs, it did not intend people to conspire with others to construct a transaction trail of Byzantine complexity based upon loophole analysis. Why are accountants who practice this generally termed “clever”?
We need the tax equivalent of FRS5 so that the badges of form and the substance are clarified.
And, of course, economic activity must be sourced to the country in which it takes place which means that sales and costs must be segmented. I am sure that they are in the unpublished management accounts of global entities; how can you monitor performance if you cannot analyse segmental profits/losses.
I agree with you on avoidance
Although the seven year rule is open to abuse
This new legislation was announced in the 2015 Budget and consulted on last summer, with draft legisation published in December. See https://www.gov.uk/government/consultations/tackling-offshore-evasion
Tax evasion is defined as, in essence, cheat or fraud.
And it will not work
Largely because there will be no resources to address it
Apart from the woeful lack of resources this is just sound bite/media politics trying to distract from the main problems. Clearly cheating and fraud have, up until this proposed earth shattering legislation, been entirely legal.
Saville and terrorism seem to have provided the perfect excuses for the police giving up on any remote idea of investigating City wrongdoing.
“Cameron knows that. And I am sure that he knows this law will be useless”
It is likely to be (as I have posted elsewhere) a box ticking exercise. I do this (box ticking exercises) with various muti-nat’ clients to prove I understand about anti-corruption etc etc. If it was any less funny it would be pathetic (I don’t mean about corruption – I mean box ticking exercises as a replacement for judgement based on experience). The “usual suspects” (the rich) will laugh at this. But that’s the point: all PR is an exercise in the construction of facades – the more impressive, the better, hmm, now who could be good at facade con–struction. Suggestions on a post card – feel free to address them to 10 Downing Street.
It seems that Cameron’s latest proposals puts the onus of tax avoidance on the employees of the finance company in question and not on the senior management/directors/CEO etc, who are the ones ultimately responsible for this illegal behaviour.
David Cameron is saying Tax Avoidance is legal until it is made illegal by law.
This means, he is prepared to loose revenue, when the laws intentions are not kept to the spirit of the law. He is either maximising Revenue or Minimising it, can not be in the middle.There being a deficit, maximising revenue should be his objective. Would it not make sense to not keep on saying, tax avoidance is OK.
Alan Duncan, a Conservative MP, told parliament that if the prime minister’s critics triumphed, “we risk seeing a House of Commons which is stuffed full of low achievers, who hate enterprise, hate people who look after their own families and who know absolutely nothing about the outside world”
This is the attitude that will stop people trusting the law makers.
Cameron received a windfall of money, used to repay a mortgage.
Dennis Skinner repeated his question to Cameron, on why he did not repay his mortgage on the Oxford House (on which a claim was being made foe expenses ) instead of repaying his mortgage on his London house.
Cameron did not answer the question again.