Saturday, 25 June 2011

Corporate tax dodging and development

In 2008 the world learnt that the banks had gambled away hundreds of billions and as a result the global financial system was in crisis. Many of the world’s major economies were plunged into recession, through the weak regulatory and although measures are being put in place to separate high street banking from stocks and shares little is being done about tax avoidance. In this same year 2008, UNISON passed a motion recognising the resources that could be raised from clamping down on tax avoidance and pledging our union’s support for the TUC’s campaign tax avoidance.
When we talk about corporate tax dodging, the impact that this has on public services and the battle against poverty in the UK and in developing coutries, its crucial that we recognise the role of tax havens.
More than half of the world trade passes - on paper at least, through tax havens.
Over half of all banking assets and a third of foreign direct investment by multinational corporations are routed through ‘offshore’ tax havens.
Research by the Tax Justice Network discovered that ninety nine of Europe’s hundred largest companies use offshore subsidiaries.
The whole point of tax havens is to enable companies and rich individuals to escape from the responsibilities that come from living in and benefiting from a society that is based on rules, laws and mutual obligations by the citizens and organisations that make up that society. All of these things, from which tax dodgers seek evasion, are the hallmarks of any decent civilisation.
As the author Nicholas Shaxson has pointed out in his book Treasure Island, tax havens have a number of tell tale signs.
Tax havens offer secrecy to clients that use their services, including refusal to cooperate with other jurisdictions in exchanging information.
Tax havens all have low or zero tax rates, for their clients but not their own residents.
Effectively these tax havens are supporting a ‘shadow economy’ hidden from the scrutiny of financial regulators.
In 2007 the International Monetary Fund also known as the IMF identified the UK as a tax haven!
So, how can such a system be changed and a framework of rules to protect national tax bases established?
The Tax justice network point out that progress can only be made at global level and that any solution must be rooted in international co-operation and transparency.
One ultimate goal to aim for would be the automatic exchange of tax information between jurisdictions, preventing national elites from escaping their responsibilities and leaving pooer sections of society to shoulder the burden of taxation. This would almost certainly require some form of global institution to protect the integrity of the system.
Another way would be set up a county-by-country reporting requirements in international financial standards for companies.
Let’s make it absolutely clear tax avoidance and evasion are unacceptable furthermore addressing them could help provide an alternative to the cuts.
Tackling tax dodging through tax havens is a huge challenge – but it is the challenge of our age.

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