Bank on the banking code

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It’s G20 week. Many hopes have been pinned on it. Many – depressingly- hope it will fail. The braggers will be out i force later this week saying it has not delivered.

And of course it won’t deliver all I want. No politician could deliver all I want yet. But as I’ve said time and again to cameras from around the world (and will again, at lest three time today) we’re in the opening bars of the overture in the new saga of overseas regulation – and it’s performed in at last three acts. It will be some time before the Fat Lady sings. I’ll be in this game to the end.

But I’d also caution those who think that the G20 is the end to look around them. The signs of change are everywhere. I’ll be drawing attention to to some of them over the next week or so, but let’s start with one highly significant one. The FT has said this morning:

Banks operating in Britain will be banned from using tax havens if they sign up to a draft code of practice drawn up by the government to address a row over their aggressive tax planning.

The draft, which also gives the tax authorities the final say over whether they consider a deal to be avoidance, is more radical than businesses expected when it was announced by Alistair Darling last month.

As it notes:

Some senior bankers who have seen the draft code, to be published in next month’s Budget, have been alarmed by its emphasis on paying tax in accordance with the “spirit as well as the letter of the law”, a subjective concept that would alter fundamentally the balance of power between banks and Revenue & Customs.

And then we get the usual suspects defending the status quo – which is destroying prospects for life, let alone a decent life in the developing world. I name the lawyers:

In recent weeks, corporate lawyers have fought back against the perception that the use of tax havens is inherently suspect, arguing they are valuable for their tax neutrality and for the ability to sidestep irrelevant complications in the tax code. Miles Walton, a partner of Allen & Overy, a law firm, said they “played a helpful and beneficial part in the world of international finance and investments”.

And I name Oxford University Centre for Business Taxation:

But the attempt to invoke the spirit of the law has shocked some legal experts. Judith Freedman, a professor of tax law at Oxford University, said: “There is a fundamental issue here about the rule of law in how we attempt to control the behaviour of taxpayers. It is whether we use legislation or whether we use the discretion of unelected officials.”

And the Tories

Baroness Noakes, shadow Treasury spokesman, said last week that the complexity of the tax code meant it was difficult to identify its spirit.

“I believe that taxation needs to be imposed by clear law,” she said.

These are the dinosaurs. On this one I’m with Paul Myners

Lord Myners, City minister, told the House of Lords this week that tax avoidance was a moral issue: “We can no longer hide behind the excuse that there is no acceptable definition of avoidance.”

The code defines tax avoidance as any outcome which could “reasonably be expected to be unintended by parliament or tax authorities” in a move likely to infuriate businesses.

Don’t doubt it: this Code should infuriate business. That reflects what needs to happen. Abuse has to end. Banks have to pay tax. Developing countries must collect the tax they are owed. Redistribution of wealth to the poor must happen within and between economies. Justice must be done. And it will be.

My suggestion is simple: sign or lose your banking licence. It is possible. Don’t doubt it.