I have to wonder how long it will be before David Cameron's tax policy falls apart all around him.
This is the man who has declared of large companies avoiding tax:
It's simply not fair and not right what some of them are doing by saying, I've got lots of sales here in the UK but I'm going to pay a sort of royalty fee to another company that I own in another country that has some special tax dispensation.
Spot on David. It's not right. And the "it's legal so it's OK" defence does not work: you're also right on that.
The trouble is that over then time you've been in office you've:
1) Cut the large company corproation tax rate from 28% to 21%, although without any apparent gain for the UK.
2) Introduced a new law that gives companies a 5.25% tax rate on their treasury function profits but only if they will move them out of the UK and to a tax haven;
3) Encouraged the new patent box rules that might cost the UK £1 billion in lost tax revenue.
4) Changed controlled foreign company rules that mean that 95% of all tax haven subsidiaries of UK companies will now be beyond scrutiny, so encouraging UK companies to shift their profits out of the UK.
5) Introduced a territorail tax base for the UK that means all profits earned out of the UK are now beyond the reach of the UK tax authorities - encouraging offshoring and the shifting of assets out of the UK.
To put it another way - all the things Cameron criticises companies for doing are being explicitly encouraged by this government. And the government's new General Anti-Abuse Rule (and yes, I do sit on the committee reviewing its rules) will not addess any of these issues, deliberately.
I could undertsand Cameron making a big issue on tax if his own government had a great record in tackling tax abuse. But it hasn't. It has a great record in encouraging it.
So there are two questions. Does he think he can simply get away with the bluster on tax avoidance in the hope that he can blame nothing happening on other countries whilst using the hype to give cover to ongoing UK abuse in the meantime? Or is he simply unaware that his two strategies are utterly incompatible, one with the other?
Let's assume he's not completely stupid and dismiss the second option. In that case we're forced to believe that he wants to promote tax competition on the one hand whilst offering empty bluster about tackling it simultaneously, and he somehow thinks he can ride both those horses at once. He can't of course; it's totally naive of him to think he can, but it's also kind of him to provide such an easy target to expose his hypocrisy.
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When is anyone from the Opposition Party going to Challenge him on this? And so many other issues where stupidity/naievete/sheer cheek are the issue. He’s like a child who thinks he can get away with being naughty. SOMEONE needs to show him he can’t. An awfully big ‘naughty step’ is needed.
Right now it is civil society doing the job
‘Let’s assume he’s not completely stupid and dismiss the second option.’
He might be, Richard, but the people who’ve drafted this unwritten policy(to make the UK and low tax haven in the course of one parliament) certainy aren’t.
As far as promoting tax competition on the one hand and tackling it simultaneously are concerned – and thus riding both horses at once – I’ll have to disagree with you on that being naive of him.
My view – backed up, I think but what we see so far, is that this is exactly what Cameron and his advisors think they can get away with. This is precisely because of the argument about what’s ‘lawful’ and what isn’t. So, when the all the measures you outline above (and more) are in place and working effectively, and the individuals and entities they are designed to benefit have had time to adapt, you can expect a complete change of tack with regard to the rhetoric, PR, and reputation management. It’ll then be all about the degree of compliance (which will have improved significantly) and (the other horse, as it were) low taxation promoting economic growth and so on.
On the latter, I’m sure they’ll be no shortage of “captains of industry” and so on more than happy to come forward and confirm how succesful such a policy has been. And I’m sure all that’s timed to fit into the run up to the next election.
One last point which fits into – and illustrates – the above quite well, I think. Earlier this week on C4 News they interviewed the ex head of Google UK (or it may have been Amazon) during the course of which they asked the now obligatory avoidance question. His response went along the lines of, what you guys really need to remember is that we’re creating employment in the UK which therefore compensates for the tax, but if you keep pushing on the tax issue we’ll simply take that employment elsewhere. I’m quite sure that’ll be one of the lines we’ll hear repeatedly when it comes time for Cameron’s avoidance bluff to cease and the compliance rhetoric to kick in. Never forget the Tory mantra “UK: open(season) for big business”
And we’ll be ready and waiting for them!
I never doubted that, Richard 🙂
It’s not either stupidity or ignorance. It’s a basic rule of politics. If you don’t want to do something about an issue but there is a lot of public anger make a lot of noise about it.
E.g. don’t want too much bank regulation but the public is angry at the banks? Tell them what naughty boys they’ve been very loudly in public and hope that does the trick.
Let’s not assume he is NOT completely stupid:
http://www.telegraph.co.uk/news/politics/9842553/David-Cameron-given-a-lecture-on-debt-and-deficit-by-top-statistics-official.html