One trillion euros are lost each year to tax avoidance in member countries of the EU. When families and businesses are tightening their belts, paying their correct taxes, huge corporate companies are finding slick ways to avoid paying their fair share.
Multinational corporations such as Google, Amazon and Starbucks don’t even try to hide their greed. Hearing the chief executives of these companies teasing us with their creative avarice is unpalatable. The actions of these corporations, while not illegal or underhand, are immoral. As Ed Miliband said, “If everyone approached their tax affairs as some of these companies have approached theirs we wouldn’t have a health service, we wouldn’t have an education system”.
When Matt Brittin of Google said that his company did not have a sales presence in the UK the truth was quickly outed. Brittin was told by Margaret Hodge, chair of Parliament’s Public Accounts Committee, that Google’s behaviour was “devious, calculated and, in my view, unethical”.
Companies can avoid tax easily by burying their businesses on Caribbean islands or in European principalities. In four years, Amazon has paid just £10m tax on £12billion of UK sales, since it was really “in” Luxembourg.
It is mainly up to member states to step up the fight against tax avoidance and fraud. But the EU is an essential bargaining power. This is another prime reason for consensual action across Europe. In a resolution in the European Parliament last week, member states agreed a clear EU-wide definition of a “tax haven” and planed a joint blacklist of these jurisdictions. This is a leap forward. Harmonising tax bases, enforcing measures to block tax havens, and reducing VAT fraud is the path to fair company taxes.
The UK, through the Commonwealth, is responsible for one in five of the world’s revenue boltholes. They are the leeches, sucking resources from the UK and poor countries. Gordon Brown began the global crackdown on tax havens in 2009. Emphasis was put on helping deprived countries deal with the losses through tax dodging that cost them three times as much as they receive annually in aid. But momentum was lost and tax cheating died away as a big UK issue. Now it’s back.
Recent research from Oxfam found that lost tax revenue from money stashed offshore costs governments more than £99 billion a year – enough to eliminate extreme poverty across the globe twice over.
One way money can be clawed back is to implement redistribution through a financial transaction tax – the ‘Robin Hood Tax’. It aims to raise public funds and discourage speculative trading by harvesting hundreds of billions of pounds every year globally. Experts have calculated that even a tiny tax on the financial sector can generate £20 billion annually in the UK alone. It could give a vital boost to the health service, our schools, and the fight against child poverty and climate change.
The tax would help rebalance our economy towards less volatile sectors such as manufacturing rather than on those obsessed with what is going on in the City’s square mile. Peter Hain MP said the Robin Hood Tax “could be one of the most popular taxes this country has ever seen”.
Eleven countries in Europe including Germany and France will adopt this tax. However, Cameron and Osborne decided that the interests of a certain square mile in the City were paramount.
Europe is absolutely right to forge ahead with measures to curb tax avoidance. Co-operation between countries in Europe and beyond is essential.
The European Parliament is taking action. But Cameron’s tough talk on tax avoidance was not matched by Conservative MEPs. They refused to back proposals to bring greater transparency to multinationals’ tax affairs. Labour MEPs have promised to name and shame those sheltering tax evaders by creating a EU wide black list of tax havens. Companies avoiding tax should be denied public contracts. Tax authorities should be resourced to tackle tax dodgers, outlaw aggressive company tax fiddles and impose transparency. Tax fairness, avoidance and fraud will dominate the future European agenda.
The outcome of Cameron and Osborne’s lame reform policies are minimal – demonstrating weakness where strength and urgency are needed. Throughout the EU and especially in Wales we must end tax cheating that cuts vital revenues.
Labour MP Michael Meacher is pushing in Parliament for guarantees that companies or individuals do not have tax avoidance as their primary purpose. It is incredible that such an elementary moral principle needs to be put into law. Such is the protozoan moral basis of some of our Big Banks and Big Businesses.
Chancellor George Osborne dreams up ever more draconian ways to punish the poor for the selfish and immoral actions of the rich. Meanwhile, Ed Miliband outlined his “fairness” alternative in his Five Labour Priorities. The future could be bright if our continent reclaims its inheritance of the best of progressive, fair, social Europe.
(EDITORS’S NOTE: the article has been changed at the request of the author to make clear references to tax avoidance not evasion)