Tag: tax avoidance

The rot at the heart of British society runs deeper than the travails of Philip Green

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By Daniel Margrain

The news that serial tax dodger Philip Green bought his third luxury super-yacht for £100 million, a sum similar to the amount that was effectively sequestered from the BHS pension fund, and which was subsequently hid in tax havens wrecking the lives of thousands of his employees in the process, is symptomatic of the kind of rot that has spread throughout the high echelons of the ruling class. Like rising damp in an old building that spreads throughout the foundations before working its way through the brickwork until it eventually subsumes the entire edifice, Britain is currently suffering from another kind of infestation that of the ruling class “elite” whose unprecedented actions and decisions are undermining the rules and laws on which the proper functioning of a civilized society depend.

The biggest scandal isn’t about the corruption surrounding the Panama Papers, bankers and the revelations about Philip Green (as bad as they are), but about wealth inequality. Currently, the top 1 per cent own as much as 99 per cent of the rest of the world combined. What the Panama Papers revelations highlighted was just how unequal the world is. In his book, ‘The Hidden Wealth of Nations’, economist Gabriel Zucman estimates that worldwide, more than $7.5 trillion is stashed away in offshore accounts. As an indication of just how much that is, the sum amounts to some 8 per cent of the entire financial wealth of the world. About 80 per cent of that has not, and will not, be taxed at all, ever.

This level of tax avoidance increases the wealth gap between the rich and poor. Hiding vast sums of wealth from the prying eye of governments makes it easier for the super rich, represented by the 1 per cent, to remain rich and avoid tax policies which are meant to help the 99 per cent. Off-shore accounts also make it more difficult for everybody else to get rich because of the uneven playing field that results from these tax havens. The 99 per cent among the mainly middle income earners are paying higher taxes to make up for the taxes that the 1 per cent don’t pay.

Although on average slightly less than 8 per cent of all the financial wealth of the world is off-shore, Europe fares worse at 10 per cent. By contrast, off-shore financial wealth in Latin America stands at 20 per cent, in Africa the figure is 30 per cent and in Russia an incredible 50 per cent of all its financial wealth remains hidden off-shore. What all this indicates is the sheer scale of a problem that hits the developing world the hardest where the results for the very poorest who have no access to any form of social protection, can literally be death.

As far as Europe is concerned, the massive use of tax havens began in the 1920s in Switzerland. In Britain this trend became a feature of society around the mid-to-late 1970s. Numerous tax havens had began to spring up during this time which is when the great wealth disparity really started to make its mark. This was no accident. During this period, the function of the state began to change from that of ‘welfare provider’ to more ‘pro-business facilitator’. The ideology that came to embody this change was neoliberalism.

Instead of the direct provision of services administered democratically at the local level, the trend has increasingly been for the state to act as a purchaser of these services which have then been provided privately and indirectly. As each separate financial intermediary takes their slice of the financial pie, the temptation for corrupt practices becomes greater and the concentration of capital and deregulation of labour markets more acute.

With the balance of economic power tilted increasingly towards the rich who are able to buy the influence of politician’s, the impact on democracy has been devastating for millions of ordinary people. This hollowed out system of democracy is one in which the 99 per cent increasingly seem to find it difficult to find some personal and meaningful pattern in a social world dominated by huge and distant monoliths whose power over the livelihood of millions seems absolute.

This explains the growing popularity of ‘unorthodox’ politician’s like Jeremy Corbyn, Bernie Sander’s and even to an extent, Donald Trump, who offer the electorate an alternative to the ‘business as usual’ politics of the corporate controlled political machine. However, until a distinct break with the current system occurs, the masses are faced with the prospect of more of the same neoliberal ideology predicated on austerity.

Contrary to popular mythology, it wasn’t the Conservative government of Margaret Thatcher which came to power in 1979 that invented neoliberalism, rather that distinction is reserved for the preceding Labour administration under James Callaghan. It was the Labour government, not the Tories, who accepted the terms of the austerity package proposed by the IMF in 1976. The main condition of the IMF loan, insisted on by the US Treasury, was that the government deficit must be reduced by cutting demand.

Interest rates were raised and government spending reduced. Wage, job and welfare cuts were the hallmark of the ‘social contract’ between wage labour and capital agreed by the unions to bail out the government. As Colin Leys notes:

“From 1976 onwards, Labour accordingly became ‘monetarist’. Its leaders accepted that full employment could no longer be achieved by government spending but must be sought through private sector growth. For the necessary investment to take place, prices must reflect real values, and this in turn required ‘squeezing’ inflation out of the system and permitting the free movement of capital. In 1978 Treasury officials began preparing to abolish capital controls.”

Spearheaded by the deregulation of the movement of capital, the breaking of the unions and the centralization of state power that favoured the corporations in the running of state enterprises, rates of inequality that had been reduced from the previous highs of the depression years of the late 1920s began to grow again. During the 1920s wealth disparity was huge. Then, as people at the top paid more taxes, and people in the middle began to earn more, the gap became increasingly smaller.

As the consensus between capital and wage labour started to go in reverse from about 1980, inequality began to increase steadily to 1920s levels which is roughly the point they are today. By the mid 1980s tax havens started to emerge in places like the Caymen Islands, Singapore, Hong Kong, Panama, Bermuda the British Virgin Islands and increasingly, London. All of the wealth located in these havens isn’t actually invested their. This means that the vast majority of people who live in, say, London, don’t benefit from foreign money that’s invested in, for example, property due to the massive rise in property prices that result from these investments.

So why do the 99 per cent put up with all this?

Many people tend to get distracted, whether that’s through working all the hours under the sun merely to survive, or through sports or other forms of leisure activities. Many others are angry but feel disconnected from the political process. The politicians, by contrast, benefit from the current situation so they are not motivated to change it, largely because they are immune from any effective political pressure from below.

The consequences for civil society that emanate from the combination of public apathy and apoplexy are potentially extreme. The lack of proper investment in public services like the NHS, social care, libraries and schools will end up with them collapsing. This is a process that to a large extent is already happening. The fact that the super rich have their money stashed away off-shore, while many among the poor don’t earn enough to pay tax in the first place, has resulted in an insufficient tax yield.

The reason why many people can’t get a prompt appointment with their GP, paving stones in the streets are cracked, their libraries are staffed by volunteers and there are pot holes on the roads that never get attended to, is directly linked to these factors. So while public services are being slashed on the one hand, people are increasingly having to pay for the ones that remain with money, in many cases, they haven’t got. If they are fortunate enough to have a job, it’s likely that their disposable income in real terms wouldn’t of increased in the last four decades.

Particularly for the young, the prospects of finding secure, fulfilling and well paid work is as remote now than it has been for at least 70 years and the situation is likely to get even worse as robots begin to replace many traditional blue collar and even white collar jobs. Leaving aside the threats posed by climate change, the underlying root cause of the problems society faces both now and in the coming period, is the inability of governments’ to take a long term approach to tackling levels of inequality that are so extreme that violent disorder on the streets may be the only language the politician’s will take note of.

‘Move along, nothing else to say’: A summary of Cameron’s role in the Panama Paper’s scandal.

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By Daniel Margrain

David Cameron’s speech to the House of Commons yesterday afternoon (April 11) was clearly intended to draw a line under the Panama Papers scandal. The Public will keep this in mind when the Tory government remind us all about “belt tightening”, “austerity” and “we’re all in this together”. The government has 92 special advisers on its books whose combined wages costs us, the British taxpayer’s, a massive £8.4 million a year, one of whom we learned this past week is paid £53,000 to “advise” Cameron’s wife about her choice of wardrobe. Maybe the British public should insist these “special advisers” run the country and cut out the middle man?

Cameron was pulled into the Panama Papers debacle last Monday (April 4) after details of Ian Cameron’s (the PMs deceased father’s) dealings featured in the first batch of documents from law firm Mossack Fonseca. This is a problem for David Cameron because he had previously made statements condemning tax reduction schemes by saying they were “wrong”, which is a word he frequently uses to describe problems he appears to have no intention of ever addressing. In 2012 he said “tax avoidance is morally wrong.” Last Monday (April 4) he again stated that those who attempt to hide their money from the UK tax authorities were “wrong”. However, when the tax affairs of his own family were brought into the media spotlight, he appeared to change his tune by claiming that such affairs were “a private matter”.

The next day (Tuesday, April 5) he said:

“In terms of my own financial affairs, I own no shares..I have a salary as a Prime Minister, and I have some savings which I get some interest from and I have a house which we used to live which we now let out while we are living in Downing Street and that’s all I have.”

The British public were supposed to be impressed with this outward selfless expression of personal “frugality”. He continued, “I have had no shares, no offshore trusts, no offshore funds, nothing like that. So I think that’s a very clear description”.  This was obviously part of a carefully prepared and scripted speech by his “special adviser’s” that sounded like a hundred lawyers had poured over it into the early hours to ensure its absolute accuracy to the last syllable. Cameron’s statement, in other words, might of been accurate but it wasn’t necessarily clear.

By Tuesday afternoon, Number 10 had sent out another clarification – a clarification of their previous clarification. This third clarification said, “To be clear, the Prime Minister, his wife and their children do not benefit from any offshore funds. The Prime Minister owns no shares.” It then went on to say, “It’s time for people to either put up or shut up in relation to questioning Cameron’s tax affairs.” (adding the word “peasants” to the end of the sentence would not have sounded out of place).

However, it’s clear the people won’t shut up. Cameron will discover that his attempts to draw a metaphorical line in the sand in relation to this ongoing scandal won’t be heeded in quite the way that he and his advisers would like. They have totally underestimated the public mood and the extent to which the British people recognize that a week of Cameron’s shenanigans represents merely the end of the beginning as opposed to the beginning of the end. The public are only now warming up for the long haul as Cameron tries his best to put his role in the scandal to bed.

Meanwhile, on Wednesday (April 6), there was a fourth clarification which stated that “there are no offshore funds or trusts which the Prime Minister, Mrs Cameron or their children will benefit from in future.” Crucially, Cameron’s lawyers and advisers had thus changed the tense. On Thursday (April 7) afternoon, there was a fifth clarification: Cameron maintained that he had nothing to hide. He revealed for the first time that both he and his wife had sold interests worth more than £30,000 in Blairmore which uses bearer shares to protect the privacy of investors’. As with money, whoever bears bearer shares owns them but they are much more portable in that they can be moved around without any paper trail. Consequently, due to the criminal implications associated with them, they have been banned in the UK. Ironically it was the tax swindler, Cameron, who banned them.

Blairmore used more than £30,000 worth of bearer shares to protect the privacy of the Cameron family’s offshore activities. David Cameron insisted that he didn’t personally benefit from any funds from his fathers tax efficient holdings other than the £30,000 described. This is clearly nonsense. As the political satirist Mark Steel in brilliantly comic fashion highlighted, this presupposes that a young David Cameron would have paid for his elite privately funded education at Eton using money he had earned himself after having saved up while undertaking a paper round.

When interviewed by ITVs inscrutable Robert Peston, who sounds like he eats a vowel and pickle sandwich every day for lunch, Cameron said that his father had left him £300,000 and that he couldn’t reveal the source of every bit of the money because his Dad was no longer around to answer any questions about it. Peston asked Cameron how he could of been certain that some of the £300,000 didn’t come from offshore sources. The answer the PM gave was that he and his advisers couldn’t be certain. This, in other words, is code for the money did indeed come from offshore sources. So unless Cameron spent the £300,000 on sweets and comics, then he is currently benefiting from offshore funds.

Let’s make a fairly safe bet and assume that he spent the £300,000 on a relatively secure investment such as property. A decade ago, a £300,000 deposit would have landed a huge investment – particularly in London – in a comfortable family home. The point being, unless Cameron blew the money, on say, cocaine and hookers or otherwise spent it unwisely (which is extremely unlikely), it’s ludicrous to suggest that he will not be benefiting from offshore funds in either the present or the future. It should be remembered that about 15 years ago Cameron bought a house with a mortgage in Oxfordshire with financial help from his father. We, the public, also helped out Cameron by paying the interest on that mortgage for the remainder of what the house cost.

The Cameron family still owns it and its value has increased to over £1 million. It will continue to increase in the foreseeable future. So too will the £300,000 worth of assets from his father increase in value. This £300,000, remember, is a sum Cameron claims neither he, his wife or children have benefited from. So contrary to the assertions of Cameron and his advisers, the notion that he is not benefiting, and will not benefit from, his fathers business in future is also an obvious nonsense. In addition to all this, he owns a second home in Ladbroke Grove in London worth £3.5 million and rising.

It’s inconceivable that Cameron would of been unaware of his father’s financial dealings in Blairmore given that he was himself involved in the Blairmore fund for 14 years (1996-2010). Secondly, the notion that he was somehow oblivious to the fact that Blairmore boasted that it was able to avoid UK tax or, thirdly, that the MPs Code of Conduct compels MPs to declare a financial interest to fellow MPs prior to participating in House of Commons business, are also too far fetched to garner any credibility.

As far as the political and media establishment are concerned, the revelation that Cameron was implicated in the Panama Papers scandal comes down to a question of PR/media mismanagement, as opposed to recognizing that his actions are immoral and, if the law was applied equally, illegal enough to warrant a prison sentence. Let me be clear about this: The super rich elites like Cameron who avoid or evade their taxes, live in the society that the rest of us who do pay our taxes are also a part of. They do not exist as a separate hermetically sealed entity isolated from the rest of humanity.

So they need to be compelled by law to pay their fair share of taxes in order that we are all able to maximize the revenues that accrue for the greatest possible utility. Failing to participate in UK society while presuming to tell the rest of us how it should be run, is incompatible with democracy. What the super rich clearly regard as their inalienable right not to pay tax, is indicative of the fact that 78 per cent of MPs are millionaires compared to just 0.7 per cent of the British population in general. Unfortunately, therefore, democracy has become a by-word for a self-serving system in which MPs effectively represent themselves and the interests of the wealthy.

This explains why the government places a greater emphasis on tackling benefit fraud which represents a relatively tiny proportion of revenue loss compared to the resources that goes into tackling tax evasion and avoidance of the one per cent of the super rich. It might also explain why HMRC chief Edward Troup was a partner at the law firm that acted for Cameron’s offshore fund. What is certain is that these kinds of cozy relationships and practices are contributing to an astounding rate of inequality in which 62 people currently own the same wealth as 3.6 billion people – 50 per cent of the world’s total population.

In terms of Britain, the end result is that tax evasion and avoidance costs the UK treasury a massive £95 billion a year which is enough to fund the entire NHS in England. The surreal irony, in light of all these shenanigans, is that during last Saturday’s London demonstration, tax payer funded police were seen outside Downing Street lining up to protect the one per cent of super rich tax dodgers from the 99 per cent of tax payers.

Another piece of surreal theatre was illustrated by the fact that the demonstration in London last Saturday was barely reported by the BBC but – in the name of impartiality – the demo outside the Iceland parliament received widespread coverage. Despite the efforts of the chattering corporate media class, their counterparts within both the Tory government and the Blairites of Labour’s  PLP, this is a scandal that the public will ensure will not go away any time soon.

Housing Benefits The Rich

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Figures shared with the Guardian by Generation Rent suggest landlords could be gaining as much as £2
Figures shared with the Guardian by Generation Rent suggest landlords could be gaining as much as £26.7bn a year from the taxpayer. Photograph: Christopher Thomond/Guardian

It’s been clear for a very long time that the main purpose of the tax system is to provide benefits to the wealthy. The minister responsible for cutting income support for the poor, Iain Duncan Smith, lives on an estate owned by his wife’s family. During the last decade it has received €1.5m in income support by way of farm subsidies from taxpayers.

In what has been dubbed the “Great British Sell-Off” and the “Sale of the Century”, the chancellor, George Osborne, intends to sell off public owned stakes in Royal Mail, RBS, the Met Office, Ordnance Survey and air traffic controller, Nats, which will rake in a one-off windfall of around £31.7 billion in 2016/17 – an amount which surpasses all privatisations since 1993, breaking even Thatcher’s record. To put this into a wider context, the money raised which will benefit the minority of Osborne’s elite friends in the city, will be the largest amount of money raised through the disposal of public assets in any 12-month period in modern history.

The ideology underpinning this public asset stripping is part of a strategy to reduce the role of the state that will do nothing to stimulate growth. On the one hand, Osborne announced £12 billion of cuts – the pain of which will be felt by the most vulnerable. On the other, he rushed through the sale of £2 billion worth of the 79 per cent stake the government has in RBS and as a result it was the taxpayers who lost out on a potential £14 billion return. It should also be noted that the Tory aristocrat, who seems set to be next in line to take the reins of PM from his friend David Cameron, had promised action on tax avoidance in spite of the fact that his family business routinely avoids tax.

Meanwhile, the UK version of a Kardashian, the royal parasite Princess Beatrice, who has been spotted taking to the water on Roman Abramovich’s £1 billion super yacht, Eclipse, has racked up seventeen holidays in eight months at our expense.

The real benefit spongers, then, are not those who feature on low brow documentary programmes, but rather they are the elites who occupy the corridors of power. If the richest 1,000 people in Britain that have seen their wealth increase by a massive £155bn since the current economic crisis began in 2008, were to actually pay their fair share of tax, the deficit the government assures us needs reducing, would be wiped out at a stroke.

But there is no priority within government to insist they cough up. Asda, Google, Apple, eBay, Ikea, Starbucks, Vodafone: all pay minimal tax on massive UK revenues, mostly by diverting profits earned in Britain to their parent companies, or lower tax jurisdictions via royalty and service payments or transfer pricing. The £1 billion that Gideon gave away to his pals in the city on August 4 in the RBS share giveaway would have gone a long way to fund the deficit in the NHS, whose trusts’ claim are “unaffordable”.

However, the redistribution of wealth from the poor to the rich doesn’t end there. After dissecting yesterday’s Guardian piece on welfare spending, Craig Murray highlights how housing Benefit represents another form of massive subsidy and wealth transfer, particularly in London and the South East of England where, in the absence of housing benefit or inheritance, it’s impossible for anyone on the average income to live.

As Murray says, the distortion in house prices in this part of the UK has nothing to do with very wealthy foreign buyers concentrated at the top end of the market, but rather, it’s to do with:

the conjunction of buy to let and state housing benefit. The state pays out 18 billion pounds a year in housing benefit, and the vast majority of that goes straight into the pockets of private landlords in the South East of England. State housing benefit underpins the entire system.”

Now the brilliance of the trick is that, as it is labeled a benefit, the left fight to keep housing benefit as though it benefited poor people. In fact this is a great illusion. It does nothing of the sort. What would truly benefit poor people is lower rent or affordable homes. Housing benefit goes straight into the pockets of the landlord class.

The landlord class of course encompasses the political class, many of whom (including Cherie Blair, famously) are also landlords. As housing benefit is paid for from general taxation, the entire system is a massive transfer of wealth from the poor to the rich, and above all from the North and West to the South and East.

The landlord class benefit not only from the taxpayer giving them enormous rents, but from the possession of artificially inflated property on which they can raise further money for more speculation…. The reason that IDS has not made a serious assault on housing benefit is that it puts money straight into the pockets of most of his Tory chums.

The largest benefit recipients in the UK are the great landlords….[P]umping in 18 billion pounds of state money a year to rents adds 288 billion pounds to property values.That explains how you reach the apparently impossible situation of median property at twelve times median income.

Bankers bankrolled by the taxpayer, as well as local authorities that administer housing benefit – both of whom owe their continuing existence to public funds – should be acting in the public interest not frittering away public money into the pockets of the rich.