5 reasons why you can't take this government seriously on tax justice

At the G8, the Prime Minister, David Cameron, sought to make clamping down on tax havens the centrepiece of the summit. As Prem Sikka explains, the post-summit communique was 'high on vague promises, low on delivery'.

But even before the inevitable puncturing of Cameron's hubris, there were several reasons why this government cannot be taken seriously on tax justice* ...

1. Government minister says he wants the UK to be a tax haven

Last year, Cabinet Office minister Francis Maude said it was "a compliment" for the UK to be described as a tax haven, and added: "That is exactly what we are trying to do."

2. George Osborne slashing taxes for big business and the rich

If there's one hallmark of a tax haven, it's low or minimal tax rates. Corporation tax was slashed from 52% in 1979 to 33% by 1997. New Labour cut it further, to 28%, and Osborne has already driven it down to 23% - and aims to get it down to 20% by 2015. This is how he described it at the last Budget:

"A headline rate that is not just lower than our competitors, but dramatically lower.
18% lower than the US.
16% lower than Japan.
12% below France and 8% below Germany.
An advertisement for investment and jobs in Britain." 

Actually, it's an advertisement to for big business to pay less tax - undercutting both other nation's tax rates and shifting the tax burden onto the working poor (as we have previously shown). Of course, cutting the top rate of tax from 50% to 45%, also facilitated avoidance.

3. Many government ministers' wealth is based on tax avoidance and evasion

As Guardian investigations have proven in the case of Cameron's family fortune, and as Channel 4 Dispatches showed in the case of George Osborne, Andrew 'plebgate' Mitchell, and Phillip Hammond.

4. You can't collect taxes without the resources to do it - and this government is cutting resources

HM Revenue & Customs is the body tasked with collecting taxes owed, tackling evasion and clamping down on contrived avoidance schemes. Combined the tax gap (uncollected, evaded and avoided) is estimated at £120 billion ... every year.

Yet the government is slashing the resources available to HMRC - as this PCS infographic shows:

5. Treasury minister in charge of tackling avoidance and evasion is in denial

Treasury minister David Gauke seems to be in a constant state of denial and cover-up

• When MPs investigated and found senior HMRC bosses to close to business, Gauke described the claims as 'absurd'. The same committee also found HMRC was "too poorly resourced" (see above).
• He approved a plan to persecute an HMRC whistleblower who exposed the 'sweetheart deal' with Goldman Sachs
• He claims the UK tax gap is 'only £35 billion' (still substantial) when all serious estimates put it at £120 billion (see Richard Murphy's analysis here)

Of course Gauke did used to work for a legal firm that specialised in tax avoidance.

There's five reasons why this government cannot be taken seriously on tax justice. Please use the comments to add more!!

* For a serious look at tax justice, see the Tax Justice Network

G8 summit: High on vague promises, low on delivery

Prem Sikka

The G8 summit in Lough Erne was preceded by much hype and promises  about action on tax avoidance and corporate secrecy, but it has  delivered little. The leaders' communiqué commits governments to nothing more than vague promises.

The most welcome development is that the ten-point communiqué  endorses automatic exchange of information in matters relating to tax evasion, assuming that something is always classified as “tax evasion”  rather than its greyer cousin “tax avoidance”. Thus if a resident of the UK has stashed cash in a tax haven, then that jurisdiction would be obliged to inform the UK tax authorities.

The Organisation for Economic Co-operation and Development (OECD) has published its proposals,  but the G8 has made no mention of any time scale for implementation. Neither does the communiqué say anything about how this information exchange is to be co-ordinated or enforced.

More importantly, how the UK is going to persuade its secretive Crown Dependencies to sign the exchange? How will places such as the Cayman Islands comply with this protocol when they do not levy income or corporate taxes, and thus do not have the infrastructure for collecting  data about taxes or tax avoidance vehicles?

The promise to reveal beneficial ownership of companies looks  attractive, as anonymous companies facilitate tax avoidance/evasion, money laundering and flight of capital. The communiqué states that this

"could be achieved through central registries of company beneficial ownership and basic information at national or state level. Countries should consider measures to facilitate access to company  beneficial ownership information by financial institutions and other regulated businesses. Some basic company information should be publicly accessible."

A number of things are noticeable. There is no intention to let the public know the details about ownership of companies. There is no mention of any timescale within which any reforms are to be implemented.  Maybe this absence of detail is indicative of oppositions that some  governments are likely to encounter from their local economic elites.

The US has a particular problem in that its own tax havens Delaware, Nevada and New Jersey need to be persuaded to embrace openness, something they have so far resisted. The UK will also have to do much to  get anywhere near the promise. At present foreign companies, including  those registered in secretive tax havens, can be directors of the companies registered in the UK. Shares in UK companies can be held by nominees, who may not be resident in the UK. Yet there is no commitment to introduce any legislation. The  failure of the UK to lead by example may also embolden the UK Crown Dependencies and Overseas Territories to resist some of the changes.

Trusts are a key vehicle for providing secrecy and avoiding taxes. The communiqué advocates more information about them too, but not for the general public. It says that the information about them should be  accessible by law enforcement, tax administrations and other relevant authorities including, as appropriate, financial intelligence units. So the public bears the cost of tax avoidance perpetrated through trusts but will not be permitted to know the beneficiaries. Again, there is no  mention of any time scale. Once again, the UK will have much to do because there is no public record of the number of trusts, or their beneficiaries.

With tax revenues, developing countries can lift their population out of poverty. So it is welcome to note that the communiqué states that “Developing countries should have the information and capacity to collect the taxes owed them … Other countries have a duty to help them”. But, once again, there is no firm commitment to deliver any policy changes in the G8 countries.

With a daily diet of revelations about tax avoidance by giant corporations, such as Google, Microsoft, Apple, Amazon, Starbucks and eBay, there was a feeling that the G8 would start a dialogue about changing the system for taxing corporate profits. The communiqué states that “Countries should change rules that let companies shift their profits across borders to avoid taxes”, but change to what? There is no commitment and no foundations have been laid for taking the matters forwards at the next G20 or the G8 meeting even though alternative models exist.

The kindest thing that one could say about the G8 communiqué is that as a result of public anger, issues such as tax avoidance and corporate secrecy are on the political agenda. However, the summit has not delivered.

Perhaps, the expectations were too high. After all, most G8 leaders are facing declining popularity at home. The UK Prime Minister is facing dissent within the Conservative Party, the policy disagreements with  coalition partners Liberal Democrats are becoming more vocal (e.g. over benefit and tax cuts), and his popularity ratings are down. Similarly,  with intransigence by the Republican Party US President Obama can’t push through his preferred policies through the legislature. So they all  need some trophies to take home, which look and sound good but will not commit them to any firm legislative action.

Another thought is that with no representations from Africa, India, China and Brazil, the G8’s terms for ending tax avoidance or corporate secrecy may not be acceptable to the emerging economic powerhouses. So the action will move to next year’s G20 summit. As always, corporate elites will be operating behind the scenes and colonising the political  agenda. Any progress on eroding secrecy and tax avoidance is going to be slow, and that is a good reason for civil society to continue to campaign for change.

This article first appeared on The Conversation website

Health tourism - the true 'cost' of foreign nationals to the NHS

A new phenomenon has emerged in recent months in the long British history of scapegoating. We've had migrants stealing our jobs, migrants taking our housing, scroungers taking benefits, migrant scroungers taking benefits (I thought they were taking our jobs?!)

Now in a new malicious and factually dubious piece of divisive scapegoating we have David Cameron and Health Secretary Jeremy 'cockney rhyming slang' Hunt accusing foreign nationals of stealing our NHS. They have a catchy phrase for it too - 'health tourism'.

However, the scaremongering immediately ran into trouble when Cameron and Hunt couldn't agree on a figure with Cameron suggesting there was between £10m and £20m that the NHS should be recouping, while Hunt suggested the NHS was losing £200m. In April a Conservative MP found through Freedom of Information requests that the figure might be £40m.

Even though Conservative Party ministers and MPs can't agree on a figure - possibly because the data isn't fully available - they have problematised foreign nationals using the NHS. And this scaremongering has worked: at a recent Benefit Justice meeting I spoke at, a contributor from the floor - after rightly bemoaning NHS cuts - went on to blame the cost an open door policy through which anyone in the world can use the NHS ... apparently.

But since we have three estimates of the gross costs of foreign nationals to the NHS, let's try to get a net figure by looking at the savings to the NHS by foreign nationals, and by British nationals using foreign health services.

Foreign nationals saving the NHS

Firstly, the NHS makes a huge saving by importing foreign nationals to run the NHS. The cost of training a doctor is estimated by the BMA to be a minimum of £269,527, up to £564,112 for consultants - the cost of which is shared between trainees and the state. According to a 2008 study by the OECD (cited in WHO research), the UK had the highest share of foreign trained doctors in Europe - with 37.5%. The same research states that the UK had 243,770 doctors in 2008, so 91,414 were foreign trained.

If the UK had borne the full cost of training those doctors that would have been £24.6 billion - and that is using the lowest end of foundation training cited by the BMA (£269,527). Given we import far more doctors than we export - and that we import more doctors than any other European country - then it's safe to say the UK is saving several billion pounds.

And that's without calculating similar costs for nurses, midwives, etc. According to research by the National Nursing Research Unit, before 2005 10,000-16,000 nurses were emigrating to the UK each year, but following the changes in 2005 the numbers decreased to 2,000-2,500 foreign nurses arriving in the UK each year*.

This is without costing in the UK lives that would be lost were these foreign nationals not there to staff our NHS. How do you think your hospital would cope with losing over one-third of its doctors? The financial, social and human cost to the UK would be immense.


The cost of UK citizens on other health services?

According to parliamentary research, in 2007/08 the average value of NHS services for retired households was £5,200 (compared with £2,800 for non-retired). Now given there are about 220,000 pensioner households living abroad that's just over £1 billion. Even if just 1% of that cost was not recouped from the UK by foreign healthcare systems, that would be over £10 million. If 5% went unrecouped that would be £51 million.

Of course these figures should be treated with a health warning: firstly, they assume health costs have stayed the same as five years ago; secondly, there are no reliable consolidated estimates for what foreign health systems fail to reclaim; and thirdly the figures exclude non-pensioner households living abroad.

Conclusion

Despite whipped up fears by the Conservatives, UKIP and their daily print editions the Mail, Sun and Express, the figures for 'health tourism' cited by the government (which range from £10 to £200m) are relatively trivial in government spending terms.

In 2012, NHS spending was £104 billion. So even at the highest end of the government's dubious estimates, health tourism accounts for just 0.19% of total NHS expenditure.

That gross figure does not take account of the savings made by the NHS by importing already trained medical staff or for UK nationals who receive unrecouped treatment abroad.

* 2002 research by the Royal College of Nursing found in just one London NHS trust nurses and midwives from the following 68 countries: Algeria, Angola, Australia,  Austria, Barbados, Belgium, Benin (Dahomey),  Brazil, Cameroon, Canada, Central African Republic, China, Congo, Denmark, Dominica, Finland, France, Gambia, Germany, Ghana, Greece, Grenada, Guyana(British Guyana), Hong Kong, Hungary, India, Ireland, Isle of Man, Italy, Ivory Coast, Jamaica & Cayman Islands, Japan, Kenya, Korea (South), Malawi, Malaysia, Malta, Mauritius & Reunion, Mauritania, Moldavia, Nepal, Netherlands, Netherlands Antilles, New Zealand, Niger, Nigeria, Norway, Philippines, Poland, Romania, Russia, Sierra Leone, Singapore, South Africa, Spain (inc Canary Islands), Sri Lanka, St Lucia, St Vincent (Grenadines), Swaziland, Sweden, Tanzania, Trinidad & Tobago, Turkey, Uganda, United Kingdom, United States of America, West Indies, Zambia, Zimbabwe

Why David Cameron is economically illiterate

David Cameron has managed to find folksy metaphors that have resonated. His one about the last Labour government "maxing out the nation's credit card" may be economically illiterate - implying that the state is like an individual consumer (a point demolished in this Guardian editorial) - but it certainly conveyed the claim that Labour had spent too much and that was why we're in a crisis.

"They didn't fix the roof when the sun was shining" resonated equally, even though it implies a classic Keynesian demand management strategy (that Labour should have raised taxes during the boom*) which Cameron would presumably reject ... but it did communicate a point that Labour was reckless.

However, his latest claim - from his speech on the economy last Thursday and repeated at Prime Minister's questions today - is that:

“They think that by borrowing more they would miraculously end up borrowing less ... Yes, it really is as incredible as that.”

But it's not incredible, in fact it's a common occurence for most people - and lends itself to a Cameron-style metaphor. Balls or Miliband could simply retort:

"It's like when you borrow money today to buy a house with a mortgage, so that tomorrow you spend less because you don't have any housing costs in later life"

The metaphor can actually be stretched even further:

"And why do we borrow more today? Just like the mortgage holder: to get an asset at the end of it. That's exactly like the infrastructure Labour is advocating on a million new council homes. As well as creating jobs, reducing unemployment, tackling homelessness and overcrowding, we'd also get extra income from council rents and save on the housing benefit bill. So yes, Mr Cameron we'll borrow more today so that we borrow less tomorrow."

In the FT today, Martin Wolf also assesses Cameron's economic credibility - and pulls no punches.


*instead Labour cut corporation tax from 33% to 28% during its period of office and only introduced the 50% tax rate from 1 April 2010, well after the boom had bust.

Cameron: Fighter for big business

So much for the Big Society. David Cameron came out swinging yesterday with uncharacteristic passion for big business, not the big society.


Having flirted with 'moral capitalism' (whatever that means), Cameron said he was "sick" of "the snobbery that says business has no inherent moral worth like the state does".

It's been a bad year for big business - not generally in the bottom line: profit margins are doing reasonably well - but, as I told the Morning Star:

"Big business has been rightly pilloried of late for dodging taxes, paying excessive bonuses, rampant profiteering, and now exploiting the unemployed through workfare.

"Cameron's speech is a reaction to the inevitable public distrust and growing anger with his government handing over our schools, welfare system and the NHS to big business.

"Activists should be proud that we have forced the government on the defensive - and keep up the pressure!"

By contrast, David Cameron called on "those of us who believe in markets, business and enterprise" to "fight this mood with all we've got."

Twitter and Facebook have proved effective at both naming and shaming abuses, and are in organising high street protests. Even the Daily Mail and Telegraph have published articles critical of mandatory forced labour.

Cameron's words mean we can expect a concerted onslaught from the governing parties and the old media - mostly reliant on corporate advertising or donations - to convince us that big corporations are rather benevolent institutions.
In Richard Murphy's The Courageous State there is a riposte to Mr Cameron: a 20-point charter setting out that "a good business":

1. Makes clear who it is so people know who they are dealing with
2. Makes clear who runs it
3. Makes clear who owns it
4. Makes clear the rules by which it is managed
5. Puts its accounts on public record if it enjoys limited liability, and does so wherever it is incorporated whether required to by law or not
6. Seeks to comply with all regulation that applies to it
7. Seeks to pay the right amount of tax due on the profits it makes in the place where they are really earned and at the time they really arise
8. Seeks to pay a living wage or more to all who work for it
9. Recognises trade union rights
10. Operates a fair pay policy so that the pay differential between the highest and lowest paid in the company cannot exceed an agreed ratio that should never exceed twenty
11. Makes fair pension provision for all employees
12. Does not discriminate between employers on the basis of race, nationality, national origin, gender, sexual orientation, age, disability, and similar such issues
13. Does not abuse the environment
14. Has a clear code of ethics that it publishes and is seen to uphold
15. Is transparent in its dealings with customers
16. Seeks at all times to minimise risk to those it deals with and takes all steps to ensure they know what those risks are
17. Accepts responsibility for its failings and remedies them
18. Works in partnership with its suppliers and does not abuse them
19. Advertises responsibly
20. Creates and supplies products meeting real human need

Don't expect Cameron to be writing this charter into corporate law any time soon.

Update: Great Steve Bell cartoon ton today's Guardian

The Tories - but where's the opposition?

Over the last few days David Cameron and George Osborne have finally elucidated the nightmare vision of what a Tory Government will look like: attacks on welfare, public sector pay freezes, raising of the state retirement age. The Morning Star spells it out in stark detail on its front page 'Tories aim to hit the poor hardest'

. . . and yet. Where have we heard all this before? The Tories say they will move 500,000 off incapacity benefit, but New Labour's stated aim is to move 1 million off incapacity benefit. They both say they will privatise welfare delivery and introduce workfare schemes - which is why the Tories supported New Labour's Welfare Reform Bill through the Commons earlier this year.

Darling and Osborne made almost identical statements on public sector pay freezes, and the Tories, who supported New Labour's Pensions Act to raise the state retirement age to 66, now say it should happen in 2016 rather than 2026.

It all reminds me of what Tony Benn - a dissident prisoner in the Callaghan (IMF cuts) Cabinet - wrote in his diary on 24th June 1977, "we have provided a blueprint . . . and we will have no argument against it". New Labour has provided a blueprint for the Tories and can have no argument against it. Tony Benn continued, "it is an outrage". Indeed.

It's also economically incompetent:

1) On its own terms, raising the state retirement age in 2016 won't save a single penny for another seven years, so it does not make sense as Osborne presented it as a solution to the deficit. It's also incredibly regressive, DoH figures suggest that someone in Social Class V has a life expectancy of 72; while social class I averages 79. This means the poorest will get 6 years of pension, the richest 13 years. Any raising of the state retirement age is regressive.

2) Cuts in pay and benefits will mean less being spent in the economy and undermine attempts to reflate. In a recession you need to put money in the hands of those who will spend - not take it away.

3) The deficit is not a problem (immediately) - the UK has less deficit then many other countries (as % of GDP) and should be investing in jobs and industry to give the economy a shot in the arm - and if cuts need to be made (or funds diverted from elsewhere) then Trident, ID cards, and the war in Afghanistan would be almost universally popular choices. This is basic Keynesianism, but instead we seem to have a austere monetarist consensus now for cuts towards a balanced budget.

There is now a massive gulf opening up on the left - and yet New Labour continues to move to the right . . .

Since Osborne and Darling want to talk up 'crisis' - while painting themselves as the saviours - then perhaps we need really drastic solutions: the appropriation of the 200 largest companies and their profits used to pay off the national debt?

For an alternative to cuts, see the LRC / LEAP briefing 'Cutting our way to defeat?'