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Tax Avoidance: The Real Scandal Is What Multinational Companies are Getting Away With

21/04/2016 12:21

Embarrassing our politicians and other public figures into publishing their tax returns is muddle-headed and distracting, however briefly satisfying.

What we should be focused on is not what individuals are paying to the Treasury, interesting though that is, but unreasonable tax avoidance by multinational companies. There is a danger of letting our leaders off the hook of tackling this more pernicious and costly problem by feeling sated when they publish their own returns.

It is a mistaken belief, anyway, that disclosure somehow means no avoidance. The reality is there may well have been plenty. The question is always not what is on a tax return, but what is not.

Lost in the fog of information and supposition when a financial furore blows up is the world of difference between hiding money from tax authorities and declaring that you have money 'hidden' from them. One is evasion and illegal, the other is avoidance, and usually not.

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Prime Minister David Cameron, we now know, disclosed the existence of an offshore fund to Her Majesty's Revenue and Customs and paid tax on his income. None of which is tax evasion.

His mother paid cash gifts to him taking advantage of a relief from inheritance tax, which is not tax evasion either, but part of routine planning undertaken by many wealthy people.

And what individuals do is also becoming less of an issue. There is plenty of action making it far harder for individuals to hide their wealth from scrutiny, including international agreement between the principal tax authorities to share data due into force next year.

But far less is being achieved in wrestling a fair shake from many multinationals on the revenues they make in the countries where they choose to operate.

There is also an entirely separate issue about how politicians go on to lucrative careers that trade in part at least on the status and contacts they made in office. Knowing how much they pay in taxes whilst they are pubic figures will not help resolve that vexed debate.

The real tax scandal is that unlike the rest of us, big corporations can more or less choose where they want to pay tax, and rather too often it's to a sandy beached tax haven far removed from where the money was earned.

This needs to stop. It not only makes if far harder for other businesses to compete, but is also unjust.

Not that they should be pilloried or shamed. They are no more to be blame for declining to pay more tax than is due than the rest of us, or David Cameron.

The fault lies with politicians for failing to close down loopholes and outlaw the sort of financial juggling that allows big international firms to get away with it. Taxation is a matter of law, not choice, however complicated recent years have made this distinction.

What the enormous leak of documents from Panama has certainly done is open the lid on a complex, murky world; but a murkier one exists in plain sight, involving household name companies with shareholders to whom executives are publicly accountable.

The pressure on public services means that taxes will probably keep rising, particularly for people not able or inclined to afford smart advice on how to avoid them. What we need to do is get more from those global companies avoiding what less mobile businesses must pay and stop fretting about individual tax returns.

Meanwhile, it is a short journey between requiring public servants to make their tax returns available and making everyone else do so, too; and just as pointless and unrevealing.

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