I read a very interesting report on the BBC’s website yesterday, it was all about tax havens. Entitled ‘Tax Havens: Is the Tide Turning,’ the report focuses on whether public opinion and corporate attitudes are out of synch in this day and age of required transparency and alleged corporate social responsibility.
The report’s writers have done their homework; they publish a broad range of facts, figures and stats and reveal how all but 2 of the FTSE 100 companies have a penchant for tax havens, and how some of the world’s biggest charities are fighting big business to come clean and pay what they say they really owe.
However, in spite of the fact that the report is well written, interesting, fairly well balanced and very informative, I have been left with a very clear sense of why all those battling to clamp down on offshore centres should actually continue to fail. What’s more, I believe that everyone who can utilise legitimate tax breaks to help them reduce their tax burden should exploit every last one of them. You see, until there’s accountability there should always be tax havens…
What The Hell Am I Talking About?
At this point you may be shocked and even disgusted by what I’ve written. After all, if you’ve also read the BBC report you will know that: -
“…all but two of the UK’s biggest 100 companies have subsidiaries in tax havens…”
“…the biggest losers are developing countries, which often lack the expertise and the capacity to prevent companies exploiting tax loopholes…”
“…ActionAid cites an estimate mentioned by the secretary general of the OECD, Angel Gurria, that developing countries lost almost three times as much to tax havens each year as they receive in aid…”
So how can I, with a clear conscience, state that in my opinion it is ok for anyone in a position to utilise tax havens for the enhancement of their taxation to do so?
Because as stated above, until there is accountability I feel that no one has any form of obligation, moral or otherwise, to pay more tax than they owe.
What Do I Mean By ‘Accountability’?
I believe that tax is a necessary evil – in theory the tax revenue raised by a nation’s government keeps people out of poverty, it keeps them safe and healthy, it educates them and ensures that those who can contribute to the greater good of society do so for the enhancement of the lives of those who can’t.
However, in the real world tax doesn’t work like that…at least not in all the so-called ‘developed’ nations around the world.
In the UK for example, tax is used to bail out banks, to bail out other nations’ banks, to warmonger, and it is squandered and wasted time and again. In other words, there is absolutely no accountability whatsoever in terms of how the tax revenue raised is spent.
The Treasury isn’t run transparently, it isn’t run like a big business with shareholders, it isn’t accountable to anyone. When its coffers run close to empty the government is forced to increase taxes. VAT shoots up, higher rate personal income tax rates increase, National Insurance Contributions sneakily creep up…and all the while those who can pay are pouring good tax money after bad down the UK’s sink hole.
There is no accountability when it comes to tax – you have to pay it or you go to prison, and it’s none of your bloody business what it’s spent on. That is the only fact here that no one can refute!
So my argument is this - why should anyone - anyone - pay any more tax than they absolutely have to?
But – Don’t Tax Havens Equate to Tax Evasion?
Tax evasion and tax avoidance are two very different issues. Tax evasion is 100% illegal, immoral, wrong and unfair. It is not something I ever condone.
Tax avoidance is all about maximising the enhancement of your taxation position, utilising every single benefit, break, haven or loophole available to you. And that’s what the BBC article is all about…
It doesn’t allege that any of the big businesses like Vodafone or advertising giant WPP are illegally evading tax by utilising offshore centres in places like Delaware, The Netherlands, The Republic of Ireland, Jersey or The Cayman Islands. Rather it questions whether they really utilise such havens for totally transparent reasons such as centralising group treasury operations, or rather to “maximise the amount of profit made by subsidiaries based where taxes are low, at the expense of those based where taxes are high.”
As the report points out, companies like Vodafone and WPP operate in many nations around the world, some of which have higher or lower rates of tax, some of which have greater corporate governance and offer better financial security than others. Therefore there are many, many reasons for companies to have subsidiaries in multiple jurisdictions.
Of course, it really isn’t a coincidence that some of the subsidiaries are in low tax countries! But then as stated, no one – not you, not me, not U2, not Vodafone – has any obligation whatsoever to pay any more tax than is legally owed. And all those who want tax fairness have to first ensure accountability in terms of what taxation is used for.
I for one would happily (alright - begrudgingly but willingly!) pay more tax if I could see my money being invested for the future benefit of my nation, or for the enhancement of others’ lives both at home or abroad – but until that day of absolute transparency and accountability from Treasuries worldwide, I will not be brow beaten or made to feel like a moral pariah by anyone from ActionAid, ChristianAid or the Conservative/Labour/Lib Dem party for refusing to pay any more than I absolutely have to.
A Final Word to the Wise…
Finally, a suggestion to all those people out there who expend excessive energy attempting to force a moral conscience on big name businesses with subsidiaries in low tax havens – you will never win.
Your voices and actions have absolutely no effect at all. Companies like these have shareholders to whom they are accountable. They will do the least they possibly can to show a seeming willingness for transparency, and they will do the most they possibly can to avoid as much tax as they can get away with.
Instead of fighting an unwinnable war why don’t you put your brand of persistent pressure on your governments to spend all tax revenue responsibly instead, and then and only then will you ever have any leverage to bring big corporates back in from the cold.
You’re looking at the problem from the wrong end!