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Rachel Baird

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

Posted: 01/08/2012 00:00

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.

 
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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 a...
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 a...
 
 
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12:39 PM on 08/02/2012
All British Citizens and business that trade in Britain shall be required by law to make full disclosure of all their assets where-ever located throughout the world, All moneys earned in the UK shall be subject to UK tax.

There shall be tobin tax on all financial transaction out of and into the UK - with the location of both parties identified.
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12:34 PM on 08/02/2012
Tax at source 'Gross' (10%, for example). Put the onus on applying for tax rebates rather than 'low-life' accountants and lawyers 'fiddling the books'. Abolish VAT on any purchase under £150.00 (taking food, petrol, basic clothing ... out of this 'paying tax twice on income'). This will not only vastly reduce the ability of individuals/corporations to 'squirrel away' vast amounts abroad, but also, get the public back into the shops, who should reduce prices due to the lower cost of transport etc.
11:30 AM on 08/02/2012
It's good to see people's comments. Certainly, there are some hugely powerful interests in favour of the status quo - but also a growing number of influential voices calling for reform. Today's Financial Times newspaper, for instance, is calling for companies to have to pay tax in the countries where they actually make their profits, rather than in the tax havens to which they conveniently attribute them. As the FT puts it: 'earnings should be taxed where the activity that gave rise to them occurs, rather than in a jurisdiction specialising in low tax rates.' The FT website is subscription-only but for information, the article is here: http://www.ft.com/cms/s/0/91a4d0fc-dbdd-11e1-8d78-00144feab49a.html#axzz22NnMGszl
09:10 AM on 08/02/2012
If they earn in the UK they pay the appropriate tax in the UK! Is this too simple? If they are found to be dodging paying their share send them to Prison.Do not forget its not only the people that earning the money,its their sneaky accountants that earn large fees on the back of the amount they can save their clients.Perhaps its time to look at them? If they are going to introduce legistation on the banks why dont they look at the accounting business? All the ordinary people are on PAYE and their tax is taken at source and cannot afford accountants and therefore the rich get richer and the lower classes continue to pay their share to support them. "We are all in this together" You are having a laugh!!
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novelist2000
veritas non olet
06:05 AM on 08/02/2012
The Australian government is waiting for cooperation on transfer pricing.

The Cayman Islands are under British control.
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HUFFPOST SUPER USER
alderton48
Operor non veto meus sententia , Solvo sermo.
02:43 AM on 08/02/2012
Clearly with the obscene amounts being quoted here, this has got to be one of the first issues that the incoming Labour Government has to tackle when Cameron and co are removed from no 10.
First because reclaiming these resources will be the deciding factor in actioning a successful radical program to reverse the misery that has been imposed on us from the current administration.

It definitely will not be easy, The complexity of the Tax laws alone will require that it will take a lot of effort, tenacity, and skilful legislation, add to that, opposition from the wealthy elite that have salted away these funds who will fight tooth and nail to hang on to their ill gotten and immoral gains.

However tackling this, and taking control away from the casino Bankers will be the first steps in re-establishing a society based on care for the weakest and opportunity for everyone, regardless of class or creed.
09:51 PM on 08/01/2012
If they are serious, then i recon they should start with Camorons own personal Jersey based tax account avoidance scheme.

But clearly they are not.
09:07 AM on 08/01/2012
There is nothing wrong with tax avoidance, it's legal. Tax evasion is illegal.
If people avoid paying tax then they are using the Governments own rules to do so.
If the Government want to clamp down then they should get their own rules sorted
Plus, the working person in the UK is already heavily taxed. In my previous job just under half my pay went in tax, nat ins and train fare, that was before I even looked at other bills.
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funkydoowopper
Reality is just an inconvenience for the right
05:09 PM on 08/01/2012
Problem is that you, me and others who can't avoid paying tax because it is deducted at source end up paying more tax because of the abuse of the tax system. The avoidance here isn't about claiming allowances and deductibles, it is about individuals and companies aggresively playing the system and dodging responsibility for their own tax bill. In slightly different circumstances it would be described as theft. Yes the rules need to change but there also needs to be a recognition that success comes not just from your own ingenuity, enterprise and hard work, which I applaud, but from the community in which a business operates. Unfortunately at the moment there are too many individuals with a pathological hatred of all things tax and too many companies that profit from promoting tax avoidance.
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novelist2000
veritas non olet
06:10 AM on 08/02/2012
Of course you get slugged more when the tax havens suck so much money from the public purses and the economies. That's the whole purpose of change, relieve the little guy who does not have accounts in tax havens.

It is slightly ironic, that the Queen is paying tax while person x and corporation y does not. George IIIrd never meant this kind of abuse when he granted tax free status to the Cayman Islands.
10:22 AM on 08/01/2012
Thanks for your comment, HisScaliness.

As the link you've posted shows, Swiss banking secrecy remains intact and UK taxpayers with secret Swiss accounts still don't have to declare them to HMRC - although some may choose to do so. Even after the UK's shoddy deal with Switzerland, HMRC still won't know which UK taxpayers own what within Switzerland.

Yes, those hidden Swiss accounts will start to be taxed and the UK will get the money, but that's a different thing. And yes, HMRC will be able to request full details of up to 500 UK-linked accounts a year from the Swiss - but how many thousands more are there?

At Christian Aid, we think there's a big problem with leaving Swiss banking secrecy intact, not least for developing countries: http://www.christianaid.org.uk/pressoffice/pressreleases/March-2012/use-budget-scrap-shoddy-swiss-tax-deal-christian-aid-urges-1903.aspx
03:09 PM on 08/01/2012
Absolutely right. Well said, Rachel. F&F.
06:05 PM on 08/01/2012
No argument with any of that.
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funkydoowopper
Reality is just an inconvenience for the right
05:50 PM on 08/01/2012
Think that just scratching the surface you should find plenty of evidence of companies abusing their tax responsibilities in developing countries. Mining for example. You can find companies that are happy to extract the mineral wealth of, say, an African country, disguise their real profits, thus avoiding their proper tax bill, and throw a few crumbs of charitable support to the locals so company bosses can feel good about themselves.
Who is out of date?
06:15 PM on 08/01/2012
Clearly you think I am defending tax dodging.
07:56 PM on 07/31/2012
according to the Act of Settlement 1701 s 1 & 2 , we are absolved of paying taxes..(allegiances with the monarch due to her reconciliation with the Pope and all things Papist)..during Coronation the congregation in representing the Citizens swore allegiance in 2 ways taxes and obedience to her laws. if she breaks the law all deals and oaths are off.
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alderton48
Operor non veto meus sententia , Solvo sermo.
01:40 AM on 08/02/2012
Can you run that again please, preferably in Queens English?
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fandabidozi
05:32 PM on 07/31/2012
Excellent article and while this evasion and avoidance carries on the poor,the sick and the vulnerable in society pay for it.

A perverse world.
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Neufield
FRESNO - CA
05:24 PM on 07/31/2012
Sieze those accounts. Why else is someone going to hide assets, to avoid taxes or to avoid prosecution of theft ? In any case sieze those assets.
07:57 PM on 07/31/2012
tax payment to the kween are not legal requirements