Tackling inequality means tackling tax dodging

We can’t provide world class public services if a few at the top keep dodging their obligations

tax-havens

Did last week mark the beginning of the end of extreme inequality? The subject dominated the World Economic Forum, with the forum publishing a 14-point plan to tackle global inequality.

Obama made it central to his State of the Union address, whilst Ed Miliband announced our next Labour government will tackle low pay by raising the National Minimum Wage so that it gets closer to average earnings,  and by encouraging companies to pay a Living Wage.

As Ed Miliband said himself, we need a reality check about inequality. Last week also saw the revelation that if inequality is left unchecked, the richest one per cent of people in the world will own more than the other 99 per cent. Since the last election average wages have fallen by £1,600 a year, with the number of people getting less than the Living Wage rising from 3.4 million to 5.3 million.

The Tories’ response? The government has cut taxes for people earning £150,000 a year, even while salaries at the very top have been soaring away.

Tackling inequality means tackling low pay, but it also means tackling tax dodging at the top. As Obama said in his State of the Union speech, we don’t mind paying our fair share of taxes as long as everybody else does, too.

Taxes pay for the services that benefit everyone, from the chance to give your children the good education they deserve, to the medical help when you need when you fall ill, the care your parents need when they grow old, to the roads and rails you rely on to get to work.

But we can’t provide world class public services if an elite few at the top keep dodging their obligations. As a new campaign launched today by anti-poverty charities points out, the UK is losing billions of pounds to corporate tax dodging every year. And it’s not just our own public services at home that suffer – some of the poorest countries in the world are losing an estimated $160 billion a year from corporate tax dodging.

The resulting inequality threatens to undo much of the progress of the past 20 years in development. It is as unfair as it is uneven.

Rapid economic growth is occurring in countries in Africa and elsewhere, attracting an increasing amount of investment from British and multinational companies. This investment is welcome, bringing with it the potential to create many more jobs and help lift people out of poverty – but only if these companies pay their way. In 2011, rich countries raised 34.1 per cent of their GDP in taxes while low-income countries raised on average only 13 per cent.

That’s why LCID applauds this new campaign to tackle tax dodging. As Ed Balls has said, at a time when working people are facing a cost-of-living crisis and the deficit is high, it’s vital that everyone pays their fair share and we restore public trust in the tax system.

LCID agrees that we must make it harder for companies to dodge UK taxes and make sure they’re not getting unjustified tax breaks. We agree UK tax rules must not incentivise companies to avoid tax in developing countries.

And if a Labour government is elected in May we should take the necessary steps to make the UK tax regime more transparent and tougher on tax dodging.

And at the global level, a Labour government will also, as Ed Miliband announced at the launch of the action/2015 campaign, fight to ensure tackling inequality is at the heart of the post-2015 development agenda, with a focus on securing equal access to healthcare and protecting the rights of women, children and workers.

So did last week mark the beginning of the end for extreme inequality? Obama faces a tough fight to get his higher tax on the top one percent through a Republican Congress.We face the fight of our lives to win in May. Perhaps, therefore, this moment marks only the end of the beginning.

But if we secure victory in May, a Labour government could mark the beginning of the end for extreme inequality, by boosting low pay, tackling tax dodging, and pushing for a new framework of post-2015 goals to ensure no one is left behind.

Charlie Samuda is chair of the Labour Campaign for International Development. Follow him on Twitter

17 Responses to “Tackling inequality means tackling tax dodging”

  1. JohnRich

    What is ‘tax dodging’?

    Evading tax that is due is already illegal.

  2. Andy

    Why did the last Labour Government not address “tax dodging” (whatever that encompasses)? There was an awful lot more of it went on.

    The current coalition has introduced the GAAR, Accelerated Payment Notices and the much criticised direct recovery from bank accounts. It has also tried to make non-declared offshore monies a strict liability offence….. I could go on.

  3. madasafish

    No doubt the author will criticise the Guardian Media Group for its use of overseas tax havens in avoiding paying Capital Gains tax on its profits from the sale of the Autotrader Group (about £290M). At the same time the Guardian was leading an anti tax avoidance campaign. Yes. Really.

    No doubt the author will critcise Ed Miliband for his use of a legal device to avoid Capital Transfer taxes on his father’s estate when he died.

    No doubt the author will criticise the loan made to Mr Mandelson by Mr Mandelson’s personal company which enables him to avoid paying income tax on the proceeds of his company’s profits.

    All of the above were above board and totally legal.

    So either the author is ignorant of the laws on tax avoidance – in which case he should not be writing an article on it – or is aware of the law and is being a hypocrite.

    If you want to avoid legal tax avoidance, change the law. The last Labour Government had 13 years to do so and did not..

  4. steroflex

    I have a friend whose relations live in a certain island in the West Indies. Of course a lot of the accounts in the hedge funds are owned by Mr Starbucks and so on – as you would expect. However there are a lot of very rich civil servants and politicians from this country who also keep their hundreds of thousands of, perfectly just, rewards there.
    I do not think Mr Miliband is going to change that, because they come from all sorts of political points of view.

  5. Guest

    No surprise you only criticise other people’s actions. As ever.

  6. Guest

    Yes, you can try and go on to divert from the fact the Coalition undermined several critical international tax treaties, killing them off, and has lowered tax dramatically on the rich, including legalising vast swathes what was illegal corporate tax evasion.

    The GAAR lowers tax bills for many richer people because of how badly worded it is (deliberately, of course), and APR’s and direct recovery will of course be used primarily against the poor, where any kind of “recovery” can easily set off a cascade of fees and charges – especially given the amount of errors made because of how understaffed HMRC is, etc.

  7. Guest

    …If you’re poor, yes.

  8. SgtVimes

    You could argue that it needs an international response but I think that it doesn’t wash. The UK has the ability to influence a great number of the world’s tax havens such from Jersey to the Cayman Islands to the City of London. Unilateral action wouldn’t have solved it but could have made a difference. I doubt a Blairite government was interested.

  9. madasafish

    So where are your mea culpas?

  10. ForeignRedTory

    Dodging, as in re-routing income so that it only becomes tax-due at a place with zero corporate tax, as in the Bahamas.

  11. Guest

    Find me the mutualists involved in tax dodging. Go right ahead.

  12. Leon Wolfeson

    Influence? Great Number?
    How about the ability to stop it, in the majority of the current ones?

    Jersey
    Guernsey
    Isle of Man
    Bermuda
    British Virgin Islands
    Cayman Islands
    London

    (And I’m pretty sure I’m missing one, too)

    Yes, all but the last would need some form of financial top-up, but the long-term costs to the economy would be far less.

  13. davidhill

    All political leaders are charismatic and one of the main traits that covers up things like psychopathy. They crave for power above everything else including the people’s overriding wellbeing if it is in their personal interests to do so…and one of the main reason why we have a vast chasm in inequality feeding poverty constantly, and far greater than ever recorded. Unfortunately it is growing without relent and will eventually have dire consequences for the world-at-large.

    CONTROL – The Most Powerful Word in the World and What Corporate Leaders and the Political Elite Crave For to the Extent of Being Psychopathic in ‘Their’ Thinking and Actions Against the People – http://worldinnovationfoundation.blogspot.co.uk/2015/01/control-most-powerful-word-in-world-and.html

  14. Keith M

    Cassini head of Boots has a damned cheek criticising Labour, when his own company uses tax havens to evade tax.

  15. Keith M

    Anyone who evades tax should be penalised.

  16. blarg1987

    Many people who know boots tax practices may perceive it as a ringing endorsement to vote for Labour if he comes out with lines like that.

    Boots is over a barrel it can;t really leave the UK as that;s where its main income is sourced from, so he is grasping at straws.

  17. littleoddsandpieces

    Came across a massive tax evasion that leaves the workers without being in the welfare state nor able to get a state pension (sole food and fuel money in old age for the poor).

    The Truck system has returned with what is called the salary sacrifice system, where firms pay part in low wages and part in expenses (with deductions for admin costs).

    Because these workers are then paid not even half the minimum wage, the firms do not pay National Insurance nor PAYE (as below the lower wage limit so nil National Insurance contribution paid and nil credits earned by staff).

    Furthermore, some firms even class staff as apprentices, entirely unaware by staff, who have received no further training other than the initial staff induction. And so paid not even a couple of quid an hour.

    A tax barrister says this means firms are evading millions if not billions in tax, by utilising what are called umbrella firms (sub contract to sub contract ad nausem).

    But by the low paid workers not being in the National Insurance system, they have no benefit nor pension rights in the future.

    It seems entirely legal by various loopholes and so evades the abolition of the Truck System by laws passed back in the 19th Century.

    As half of the jobs created by 2008 are part time, these folk if in their 50s are heading into nil state pension for life with the flat rate pension.

    Today you get a pro rata pension for 1 year NI record.
    With the flat rate pension you get nil state pension for 10 years or less NI record.

    So has the state pension ended for the poorest workers?

    It has ended for me and I worked in a full time job all my life.

    See why, under my petition, in my WHY THIS IS IMPORTANT section, at:

    https://you.38degrees.org.uk/petitions/state-pension-at-60-now

Leave a Reply