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

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