THE BLOG
08/11/2017 15:02 GMT | Updated 09/11/2017 06:58 GMT

Why Tax Dodging Is Fundamentally Unpatriotic

To avoid paying your tax is to shirk your responsibilities as a citizen and to deprive the country of vital assets that can help improve the life chances of those within it. Taxation helps to bind people through a shared sense of purpose and commonality.

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Following the Paradise Papers leak, countless documents have shown the scale of what is a thriving tax dodging industry, involving leading figures from the Queen, Lewis Hamilton to Bono. Amidst the public furore, a more fundamental point about tax avoidance is lost. Shirking your tax-paying responsibilities is completely unpatriotic.

The paradise papers show how companies and individuals use tax havens in British crown dependencies and overseas territories to hide their wealth. A BBC Panorama investigation reveals a network of lawyers and accountants who exploit legal loopholes and implement aggressive tax avoidance schemes to help those who don't want to pay tax.

Earlier this week, Radio 4 presenter John Humphrys interviewed Shadow Chancellor John McDonnell on his proposed policies to tackle tax avoidance. Humphrys suggested a stricter tax regime is unworkable as it will lead companies and individuals to transfer their wealth from UK jurisdictions to low-tax countries.

This capital flight argument is often used by those seeking to stifle change, and it fails to recognise the power and influence the UK has over tax dodgers. The UK government's lack of action in this area has previously been criticised by the European Parliament for directly obstructing the fight against tax avoidance. For tax justice campaigners, reforming the system is a no brainer as it provides the funds necessary for public services and communities.

Why proper taxation is possible and necessary

HMRC estimates that £34 billion in taxes goes uncollected each year, of which a large part is from tax avoidance (the use of legal loopholes to avoid paying tax) and tax evasion (an illegal method of not paying tax).

Businesses operating in the UK and known for dodging their taxes, such as Apple and Nike, benefit from our markets, consumer base, and skilled workforce. Meanwhile major IT companies Dell and Oracle, previously criticised for not paying corporation tax, have earned millions from government contracts.

This means the UK government has significant leverage to exert pressure on companies and to create a stricter tax regime in its jurisdictions without fearing the loss of investment and business ties. Companies can be incentivised to act responsibly, and if they choose to ignore their tax obligations then the government should feel confident it can hold them accountable.

But there is a more crucial issue to consider here. To avoid paying your tax is to shirk your responsibilities as a citizen and to deprive the country of vital assets that can help improve the life chances of those within it. Taxation helps to bind people through a shared sense of purpose and commonality. It provides a safety net that helps future generations grow, and through education and healthcare funding, it recognises the value of equal opportunity and warns off poverty, ill health and illiteracy.

The EU referendum has spurred on feelings of nationalist sentiment, with the Daily Mail spearheading an anti-Brexit campaign that aims to "take back control" of Britain. One of its most notorious headlines, "Enemies of the People" attacked judges for ruling that Brexit could not be triggered without a Westminster vote.

But the Mail's owner, Lord Rothermere, has been complicit in the tax avoidance scandal as his company is currently registered in Bermuda and Jersey, allowing it to withhold funds from a country his newspaper claims to love. If the Mail and its owner are truly patriotic then surely he would insist in the company being wholly UK registered, and pay its proper taxes.

The UK's must act now to rescue its reputation

This week's news is one of many corporate scandals involving UK firms and citizens. It follows the Panama Papers expose and a spate of reports alleging that the UK has become a money laundering centre, where dirty money flows in and out of the country. More worryingly, Brexit may further undermine the UK's financial reputation as the government seeks to curry favour with businesses by lowering its taxes.

The government must act now to stave off any prospect of the UK becoming a tax haven. This means implementing a programme of reform which includes closing legal loopholes that allow people to use the law to take money away from schools and hospitals.

Additionally, tax dodging is the result of money being transferred to low tax jurisdictions via shell companies and trusts with anonymous owners. The UK government should call on the crown dependencies and overseas territories to publish a record of owners and accounts linked to trusts and companies, targeting those who hide their wealth in these havens. Lastly, companies which don't pay the appropriate tax should not be able to win government contracts.

There is no denying the difficulty of recovering taxes, especially as capital and companies move seamlessly between borders. What's needed however, is a resilient and creative approach to the problem. But most importantly, we need a steadfast commitment to the aims of taxation: to build national standards and foster ties between today's citizens.