Jim 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”.