THE BLOG

Tax Havens: They Simply Shouldn't Exist

11/04/2016 13:50

11.5 million documents leaked from "one of the world's most secretive companies", Panamanian law firm, Mossack Fonseca, have given us a view of how the elite of this world conduct their financial affairs and hide their wealth from scrutiny. Tax havens are organizations facilitating the theft of wealth from countries to the benefit of the super-rich. Despots, kings, princes and corrupt senior government officials in the developing world, who treat their countries as their private properties, use them to hide what they pillage from the impoverished. Even when this wealth is legitimately earned, hiding it in tax havens is depriving societies the world over from revenue that makes civilized living possible. At a time when austerity is hitting the most vulnerable, lost taxes imply that an even heavier burden is being inflicted on those least able to bear it.

That this goes on is no surprise to most people. In fact an Oxfam report (2013) estimates that money hidden in tax havens amounts to $18.47 trillion "over a third - $7.18 trillion (£4.7tn) - is sitting in accounts in British Overseas Territories and Crown Dependencies". Just the lost revenue from that amounts to $150 billion, "enough money to end extreme poverty twice over". Where would society be if all of us avoided paying tax in that way?

The difficulty we have in most societies is that people do not make connections between paying tax and the services provided by the state, such as education, and in the case of Britain, the NHS, the infrastructure necessary for the country to earn its wealth, the Police, the Army, the welfare safety net etc... The super-rich make use of most of these services on the way to making their money.

It is unfortunate that many people see tax avoidance as a virtue. The ingenuity of lawyers and accountants employed to enable those who can afford their fees to pay as little tax as possible is seen as something to be admired and copied.

It is odd that governments, politicians and civil society do not do more to promote the value to society of paying one's fair share of tax, rather than governments continuously trying to reduce it. They seem to collude with the notion that it is a necessary evil that should be curtailed whenever possible, and implicitly stamp the seal of approval on those who can exploit loopholes to avoid it.

One need only look at some developing countries where taxation is practically nonexistent to see the consequences of such a system: the degraded environment, the rubbish in the streets, the poverty and the squalor that assail your senses once you leave your comfortable home, if you are lucky enough to belong to the privileged elite with a comfortable lifestyle.

I am sure the super-rich in the developed world would not want to live in such a bubble of privilege while surrounded by poverty and squalor. Enlightened self interest should drive all of us to pay our share of taxes willingly, with those most able carrying a heavier load. The existence of tax havens, however, is too much of a temptation to resist by those who have the means of using them to avoid making their fair contribution to society.

Following the revelations of the Panama papers, many establishment figures are now calling for reforms and transparency in the way tax havens conduct their business. But the core problem is the existence of tax havens. In a fair and just world they simply should not exist. Credit must go to The Green Party leader, Natalie Bennett, for calling for the abolition of all tax havens under British control.

Comments

CONVERSATIONS