Tax Dodging: It's Time to Widen the UK Debate

If the UK government is actually serious about tackling tax dodging, then it should be working with other countries to tackle the international dimensions of the problem, as well as chasing relatively esay, media-friendly villains such as tradesmen and 'cowboy' tax advisers in the UK.

Tax has been a huge story in the UK of late. It began with revelations about the £13 trilllion hidden in tax havens - and UK Government promises of a crackdown on 'cowboys' who sell cynical ways to avoid tax.

Then Treasury minister David Gauke declared it 'morally wrong' to pay tradesmen in cash, triggering a national row.

In the latest twists, HSBC bank, already under attack for failing to prevent drug money laundering, has been further embarrassed by reports that its UK clients used the bank's Swiss branch to evade tax - possibly more than £200 million of it. The UK taxman, meanwhile, is in the news today for paying for information on tax dodgers.

All this debate is good. At a time when there isn't enough money to pay for the UK hospitals, schools and other public services that people need, it's great to see these legal and moral challenges against tax evaders and avoiders and those who help them.

But isn't it time to widen the discussion - and get on with some action to tackle this menace? Tax dodging, after all, is an international problem like drug trafficking and climate change - it's not something the UK can deal with alone.

It is international in the sense that when people and companies cheat their way out of paying their dues, they often do so by hiding their money abroad, in a country which doesn't tell the UK what they're up to. That's how trillions ended up in tax havens.

Switzerland alone is thought to be hiding tens of billions for UK taxpayers who use the notoriously secretive Alpine haven to keep their money out of sight of HMRC.

But tax dodging is also an international problem in the sense that multinational companies are increasingly exploiting the fact that they have operations in many different countries in order to slash their tax bills. In essence, what they do is to claim they made most of their profits in countries with ultra-low tax rates, rather than in countries where they have millions of customers, staff and offices.

Their clever accounting is difficult for tax authorities to challenge - and it slashes the companies' tax bills and hurts public services across the world.

The poorest countries are particularly hard hit. They can't afford enough highly trained tax collectors to challenge the armies of expensive lawyers and tax accountants who dream up new schemes.

Christian Aid, my employer, estimates that multinational companies cheat developing countries out of $160 billion a year, which is far more than those countries get in aid. Given that their schools, hospitals, roads and so on are already far weaker than ours, this haemorrhaging of money is especially devastating to people living in poverty.

If the UK government is actually serious about tackling tax dodging, then it should be working with other countries to tackle the international dimensions of the problem, as well as chasing relatively esay, media-friendly villains such as tradesmen and 'cowboy' tax advisers in the UK.

In particular, the UK should be leading the way on international action to end tax haven secrecy. What's needed is a system through which governments automatically share information with each other about who owns what within their borders. Introduce this, and UK taxpayers with undeclared Swiss bank accounts would suddenly have a lot of explaining to do, along with everyone else using tax havens to hide their crimes.

The UK should also be working with other governments to tackle multinational companies on tax. Getting companies to reveal more information about where they are making profits and paying taxes would benefit countries across the world. The extra information would help them spot when companies are dodging tax by unfairly shifting their profits out of the countries where they made them and into tax havens.

At a time when the UK and many other countries are struggling to raise enough money to fund vital public services, it's high time for governments to act against international financial secrecy that tax dodgers find so helpful. Debating the morality of paying your plumber in cash is fine - but it's not going to bring back the missing billions.

Close

What's Hot