Let’s offshore the offshorers

jimtoggleJim O’Neill is back, and he has tax avoiders in his sights. Is this an area in which Labour and the SNP can unite in the interests of a fairer Scotland?

 

Hello again, all my jolly Cybernat friends. I’m back! Bet you missed me.

See if you can identify who wrote this quote:

“It is not unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than that proportion.”

It has always amazed me that one of the most right wing think tanks in Britain should take its name from someone who created such a statement, which could have been written by Karl Marx or Friedrich Engels. For it is a quote from Adam Smith, from his “Wealth of Nations”, the book that is often quoted as having created the study of economics.

Of course, throughout history the rich have always sought to minimise their contribution to the public coffers, and have laid the burden of bearing those costs on the poorest, arguing that their greater wealth that resulted would trickle down to those less well off.

During my break on the other side of the world I have been reading, among others, a fascinating book by Nicholas Shaxson of the Tax Justice Network called Treasure Islands – Tax havens and the men who stole the world. In the light of the Panama Papers, it was interesting to see how the tax havens were created, which countries control them, and how the rich have used their ownership to prevent any effective action to bring them to heel.

This is most relevant since the EU have recently declared that Ireland’s deal with Apple is illegal, and that Apple will have to pay €20bn back to Ireland in fines and taxes. What is even more bizarre about this is that the Irish Parliament, with the honourable exception of Sinn Fein, have decided to join Apple in seeking to have this decision overturned in the Courts.

This money could pay for much social benefit to the Irish people, so why are the Irish turning this down? It turns out that the offshoring deal which the Irish have with Apple has been replicated with many other global companies, and this threatens Ireland’s position as one of the most successful offshoring states, where big business hides their profits, in the world.

Let’s look at an example closer to home. We all know that Amazon has two major distribution warehouses in Scotland. Yet when we receive Amazon deliveries they mostly seem to come from their Luxemburg subsidiary. This is a prime example of offshoring. All the profits from our purchases are booked against the Luxemburg company, while all the costs, staff, books, equipment and other overheads are booked against their British subsidiary.

But if all the profits go offshore, how does the British company pay for the overheads? By borrowing from the Luxemburg company, and repaying at interest. This means that the British side makes little or no profit and so pays little or no tax to the UK where tax is higher than in Luxemburg and also would avoid paying their fair share even in an independent Scotland.

The inventors of this scam were a 19c Liverpool family of butchers, the Vasey family, who were so successful at offshoring all their profits that their major string of butchers’ shops, Dewhurst’s, often only paid £10 tax on millions of pounds of profit. It is this kind of scam, much modernised and made even more efficient, that David Cameron’s father engaged in, and from which our last Prime Minister profited. Little wonder that it is so difficult to shut these organisations down.

One of the keys to the modern science of offshoring is keeping the actual, or beneficial, owner of the company secret. This is where Scotland has come to be sucked into the morass. Using limited liability partnerships it has become easy to set up shell companies through which funds, both legal and criminal, pass on their way to the great offshore centres of the Caymans, the British Virgin Islands and Panama, to name but a few. It has been discovered that many of these companies are resident in Scotland, often thousands at the same address, and by ignoring this we are turning a blind eye to tax evasion under our own noses.

Surely it is in the interests of both Scottish Labour and the Scottish Nationalists to try to root this evil from our country? (You note I do not include the Tories in this.) Here is a real challenge in which we can work together towards a fairer society, to make such practices illegal and to expel these chancers from our country. Even if the Scottish Parliament does not have the powers to act in this area, surely we could join together to campaign for legislation to control these organisations, and to publicise their existence and those who host them here?

I am also certain that there is action we can take against the big companies to ensure that they contribute to the costs of creating the workforce from which they have benefited. If we can create planning legislation that can build in a public benefit for an area in return for the granting of planning permission, surely it is not beyond the wit of our politicians to create a similar system for those companies who offshore their profits, pending a fundamental review of the global tax system to ensure that all profits are booked in the country in which they are earned.

I really do think that these are areas in which we can work together, to the benefit of our society, and to send these tax cheats “homeward tae think again”.

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17 thoughts on “Let’s offshore the offshorers

  1. “Of course, throughout history the rich have always sought to minimise their contribution to the public coffers, and have laid the burden of bearing those costs on the poorest, arguing that their greater wealth that resulted would trickle down to those less well off.”

    And because “New Red Tory Blairite Labour” supported and implemented the ideals of Privatisation Tuition fees welfare and benefit cuts not to mention means testing they were identified and punished by an electorate who didn’t like the idea of betrayal by a Party who went from opposing the idea of supporting the rich to ideals which helped increase the transfer of wealth distribution from the poorest to the richest.

    Even now all we see is labour exercising its limited and narrow vision where every solution is the raising of revenue. Not just from the top quartile but from everybody.
    You would raise EVERYBODIES Council tax you would raise VAT for EVERYBODY you would keep in place APD for EVERYBODY you would force tuition fees on EVERYBODY!
    Labours term in office was not only one of Warmongering and the diversion of public funding from the public to Private sectors but one of massive tax hikes.
    The extraordinary draconian rises in council taxation over Labours period in office would make the Kremlin blush with shame. This during a period where wages and income where not only frozen but CUT!
    If Labour had won the 2007 and 2011 elections we would have tuition fees in Scotland pegged at 9k per term.
    And now we’re supposed to believe todays promises? The 180 degree flipflop of policy proposals because Labour are lying 3rd in Scotlands political table.
    You’re being judged on what you do not what you say you will do because we’ve heard it all before. The broken promises and the lies.
    The Scottish Government is doing everything the vast majority in Scotland want them to do and all Labour in Scotland can do is oppose them for opposition sake and still expect that majority to vote for them.
    That’s beyond delusional. That’s an incurable blindness which will see the end of Labour completely.

  2. Hello Jim. I’m sure all your CyBritnat friends also welcome back your entertaining homespun mince.
    Could you tell us where Peter Mandleson’s money came from? A man who couldn’t afford a mortgage, then after a few years has to put his personal moneys into a blind trust. Where did he get this money?
    Could you tell us if Brown, Blair or Darling off-shore any part their loot?
    Could you tell us if Labour would grant Holyrood the POWER to affect company tax rates, and if not, why not?
    Would labour welcome any empowered Holyrood tax adjustment that allowed Scotland to grow its on-shore economy at the same rate as the UK, for the first time in more than a century?
    Ireland thinks jobs, and the revenue that accrues from employment is more important than direct taxation from business—-why doesn’t Labour, which when in government, sees unemployment, social dereliction, wasted lives, underachievement as a price worth paying for Labour fat cats to get even fatter in the Lords?

  3. Jim,
    The sweat heart deal between Apple and Ireland that is against EU laws, what does it tell you? You lay out the basic facts as always eloquently, EU commission tell Apple to pay 20B Euros in un paid corporation tax to an EU member state and the government of that member state, Ireland say they don’t want the money, any thoughts on why, as you say such a bizarre set of circumstances could arise and what can be deduced from them? You moved on to Amazon and their sins without offering an opinion on the Apple/Ireland/EU tie up.
    I know what it tells me. It tells me that Ireland is not really interested in playing by the rules of the EU and are prepared to ignore them if it suits them. If Apple and Irish government manage to overturn the EU commission ruling or somehow manage to ignore it, it tells me the EU commission is toothless in its power to force big multinationals to comply with EU rules and that tells me the EU is useless. Do you agree?

    1. ” It turns out that Ireland has replicated the Apple deal with many other companies” Did you miss that bit?

      1. No I did not, but its the Apple deal that has come to the attention of the EU Commission and if it is not resolved in favour of the EU and Ireland gets to flaunt EU tax rules then the EU is done for.

  4. How can it be toothless when it takes and EU member state to fully cooperate with the multinational in order to challenge the issue?
    Any ruling by the EU will be because of the actions of its member state not the actions of the multinational.
    Isnt it nice to see a small member state in the EU exercise its mustles and not let itself be bullied by the EU commission?
    Kind of kills the argument that the UK had no power within the EU itself eh? And that Scotland wouldn’t have any either.

    1. Mike,
      I think your missing the point here. If there is not unanimity across all Europe and individual EU states are able to go and negotiate separate deals with the big global companies then the EU is impotent when it comes to dealing with them. That is (one of) the point for the EU; so that multinationals can not play one small country off against another. Its the same reasoning behind the formation of trade unions.

      1. The EU has always relied on the fact that any member can abstain and hold back legislation and policy.

        The EU isn’t the UK its far more democratic and allows even the smallest member far more power and authority to defy overall dictate.

        http://www.irishtimes.com/business/technology/law-to-allow-snooping-on-social-media-defies-european-court-ruling-1.2712580

        http://news.bbc.co.uk/1/hi/business/1150309.stm

        http://www.bbc.co.uk/news/blogs-eu-29617524

        https://www.ft.com/content/e3b53640-4108-11e6-9b66-0712b3873ae1

        http://www.reuters.com/article/us-spain-economy-idUSTRE8210TJ20120302

        It all proves that the EU isn’t the draconian despotic regime painted by the Brexiteers at all.

        Unlike the UK of course which is in fact far more draconian and despotic than the media dares to portray.

        The fact that the idea of a Scottish devolved Government would defy the dictates of Westminster over leaving the EU will result in a constitutional crises which will end the UK is proof of that.

  5. Mike,
    Facts please, look at the pertinent facts here and answer these two questions. Mike, for the duration of this exercise try and keep Scotland and Westminster from your thoughts, they having nothing to do with this issue.
    1) Why is the EU Commission demanding Apple pay back 20 Billion Euros in unpaid tax to Ireland?
    2) Why is Irish government refusing to accept the 20 Billion?
    If you don’t want to try and understand the reasons why Ireland doesn’t want a 20 Billion euro tax windfall and the implications all of this has on the powers and influence, the efficacy, i.e. the ability to function, of the EU then just say so Mike and I’ll call it quits.

  6. Im just spitballing here but could it be because Ireland is due a hell of a lot more than 20 billion and the EU is trying unsuccessfully to force Ireland to accept far less than its due?

    1. Or it could be that the EU is acting as a mediator and has suggested Ireland accept 20 billion of their due taxation rather than try and chase up the full amount?
      The UK has already accepted far less taxation than its due from the biggest global companies on the planet because they said it would be too much of an effort to chase them for all of their taxation dues.

  7. Mike,
    Like you I voted to Remain in the UK/EU referendum but I am now serously questioning my decision.
    I think what happened between Apple and Ireland was the Irish government wanted Apple to set up their European base in Ireland and promised the company a near zero corpoartion tax rate to did so. That this broke EU tax rules was considered by the Irish government at the time, of secondary importance to the value of the high paid high skilled jobs that came with Apple’s long term investment in their country. In other words this was too big an opportunity to pass, so the Irish government put its own interests ahead of its EU conditions of membership.
    What does this all mean. as I said in an earlier post if the Apple and Irish government get away with this open disregard of EU tax rules then the EU is no longer an organisation with any collective power. Personally I think it means that those that voted Leave in June were a lot more perceptive in their judgement that we give them creedit for.

    1. So like me you don’t actually know then? So my scenario is just as likely as your own speculation?
      You shouldn’t really be changing your mind based on things you don’t know its usually best when you do it based on what you do know.

      See throughout your post you begin with speculation and maybe then get ever more convinced until finally you finish up with a factual account.
      Ive never seen anybody convince themselves so fast.
      So which is it? Do you “Think” this is what happened or do you “know” this is what happened?

    1. But you do need to “KNOW” where you are relative to where the wind is blowing. Thinking you know isn’t good enough.

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