It has been described as a “corporate coup d’etat” – Cameron’s plans to “engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century.”
“At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%.”
Under new proposals, companies will not pay any tax at all in the UK on money made by their foreign branches. This will mean that money that has passed though tax havens will remain untaxed when it reaches the UK. Amazingly, the UK will be only the second country in the world to allow this – Switzerland is the other.
The proposal, however, will only apply to “large and medium companies” – it is not available for smaller firms. Surprise, surprise. The government states that it expects “large financial services companies to make the greatest use of the exemption regime.” So who are the government implying? The banks. Yes, in a move that will shock… well, no-one, Cameron and the Conservative Party are introducing proposals to ease of the strain off of the poor banks and to help create a new European tax haven in the UK.
“While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this.”
The measures will accompany the large reduction in corporation tax from 2014: down from 28% to 24%. George Osborne stated that he wants to bring corporation tax to “the lowest this country has ever known” whilst a Treasury Minister boasted that the rate will be the lowest “of any major western economy.”
Wealth could literally be drained from the UK as the new measures will create great incentive for big businesses to outsource staff or funnel earnings through tax havens. Those businesses that do not will face an unfair disadvantage.
These proposals are unsurprising, in reality. The seven committes that the government set up “to provide strategic oversight of the development of corporate tax policy” are almost exclusively big corporate executives from Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays. Activist group UK Uncut has been targeting big corporation tax evaders like Tesco and Vodafone, and strangely enough they show up in the committees set up to oversee the development of corporate tax policy! Coincidence? Read what UK Uncut has to say about Vodafone and Tesco below:
Vodafone: For the last ten years Vodafone have been fighting tooth and nail to avoid paying the UK government around £6bn in tax. Court case followed court case, and eventually HM Revenue and Customs won a decisive victory. Vodafone were on the ropes and all that was needed was a couple more government knocks to finally make the communication giant pay up. But instead of forcing through the deal, the exchequer, run by George Osborne, let Vodafone off. It was one of the most shameless, blatant and costly examples of corporate-government cronyism in years. But at a time when the government are insisting upon massive cuts in public spending, the deal is particularly hard to swallow.
Vodafone are relatively open about their motivations. “The maximisation of shareholder value,” their website declares, “will generally involve the minimisation of taxation.” In India too, Vodafone have sought to avoid a further £1.6bn tax bill. However, the Indian authorities, unlike the British, have successfully pursued Vodafone for the money, forcing them to pay up.
Tesco: Tesco control 30% of the UK grocery market and have over 2,000 stores in the UK. In 2010 they made a profit of £3.4bn, yet they will still go to great lengths to avoid paying tax. Using complex legal structures Tesco has avoided stamp duty land tax to the tune of £90-£100m and £23m in stamp duty.
Tesco has its headquarters in the sleepy Hertfordshire town of Cheshunt. Something else that you can find there is Cheshunt Overseas, a limited liability partnership that has enabled Tesco to avoid £16m in tax through overseas business rules.
It also goes deeper than that, however. Without even delving into Conservative ideology or past performances, one can easily look into where the funding has been coming from. According to new research from the Bureau of Investigative Journalism, a non-profit organisation based at City University in London, funding for the Conservatives from the private sector rose from £2.7m in 2005 to £11.4m last year. The amount coming from the City of London has more than doubled in percentage terms and now accounts for more than half the Tories’ funding. It rose from 24.7% of donations in 2005 to 50.8% in 2010.
The research also found that City donations to the Tories amount to £42m since 2005. Total donations since then soar to an incredible £101m in total. The top 10 City donors gave the party £13.16m, accounting for 13% of overall Tory funding since 2005.
Does this mean that the Tories feel a certain obligation to ensure that the City’s interests are maintained over the public interests?
Dr Stuart Wilks-Heeg, an authority on political party funding at the University of Liverpool, told the bureau: “The findings raise issues about how influenced and impartial the Conservatives are as they set about reforming and regulating the banking industry. It is admittedly difficult to prove that because parties access money from specific sources that there is a feed through into the policies they adopt. Yet, given we have just experienced a blowout in the financial system, and are witnessing an ongoing struggle over its regulation, the scale of Conservative party funding from the City must be an issue – not least for a party committed to ‘taking big money out of politics’. This is a very important piece of work.”
Iain Overton, editor of the Bureau said: “The scale of money from the City to the Conservative Party poses the question: are the Conservatives able to separate the interests of their financier backers from the wider national interest?”
- Nick Marsh: To us, it’s an obscure shift of tax law. To the City, it’s the heist of the century | George Monbiot | Comment is free | The Guardian (guardian.co.uk)
- Revealed: 50% of Tory funds come from City (guardian.co.uk)
- The Tories are funded by the City, but for how long? (blogs.telegraph.co.uk)
- City ‘donates half of Tory funds’ (bbc.co.uk)
- Tory dependence on City money should come as no surprise (leftfootforward.org)
- City bankrolled Tory election campaign (guardian.co.uk)
- Britain: The New Tax Haven of Europe (negativentropy.wordpress.com)
- The Topshop Protests of 2010 (negativentropy.wordpress.com)