The Paradise Papers and Tax Avoidance

People will by now have grown well-used to revelations about Tax Avoidance by large corporations and the wealthy elite. However this week’s BBC Panorama programs on the so-called Paradise Papers (available to watch here and here), about the widespread use of offshore Tax Havens, will have shocked many by the sheer scale of the avoidance that is going on – and not just by the usual suspects of large corporates like Apple, or corrupt individuals like ex-Tory Treasurer Lord Ashcroft, but also including much-admired sports stars like Lewis Hamilton, and much-loved celebrities like the cast of Mrs Brown’s Boys.

However the program unfortunately failed to explain just why such Tax Avoidance is so prevalent, and how nothing will change until we make fundamental reforms to our parliamentary system.

Some may think that Tax Avoidance is so devilishly complicated that it is very difficult for governments to come up with an effective way of dealing with it; or alternatively that it has up until now been very well hidden, but once exposed effective action can be taken. Neither of those points is true.

File:View from top of Gibbs Lighthouse Bermuda.jpg
Tropical paradise Bermuda is one of many British Overseas Territories that facilitates widespread Tax Avoidance. Picture © Mike Oropeza

The reality is that legislation, though complex, is easily within the capability of government experts to deal with. However they don’t, because successive governments have been absolutely complicit in facilitating Tax Avoidance, and will undoubtedly continue to be so, while all the time trying to fool us by making statements to the contrary. The reason is very simple – in a system of government where our political parties are reliant on private funding to run their operations and fight election campaigns, they are completely beholden to the providers of that money as to what legislation they enact. Take for example ex-Tory Treasurer Lord Ashcroft, who is one of the worst individuals for avoiding tax and featured in the recent program. He has donated over £10 million to the Tories over the years, and indeed contributed £500,000 to their recent General Election campaign. ‘He Who Pays the Piper Calls the Tune’, and his involvement in Tory funding therefore represents a massive conflict of interest. What chance is there of the Tories, even if they have a fit of good conscience and want to take action on Tax Avoidance, being actually able to do so, when their ability to win general elections is dependent on the continued financial support of someone who clearly doesn’t want such changes to be made? It obviously isn’t going to happen. And it’s not just Lord Ashcroft – over half of all Tory funding comes from the financial sector*, providing a relentless source of pressure to keep such Tax Avoidance loopholes open. (I’m afraid it’s not just a Tory problem either – the last Labour administration under Tony Blair was similarly reliant on donations from wealthy business people).

So what will actually happen? There will be many outraged speeches in Parliament, closely followed by promises of firm action by the government. There will then be the ritual punishment of some of the more minor players (the cast of Mrs Brown’s Boys better watch out), followed by some relatively insignificant changes to legislation which the government will talk up to make us believe the problem is solved. However behind the scenes the government will be reassuring people like Lord Ashcroft not to worry, be patient, and soon all will be well. Then, in a year or two’s time, when it’s all blown over, the government will quietly make some more changes to tax legislation, with a couple of loopholes deliberately included to help their wealthy friends. And that will be it – back to business as usual.

Don’t forget, whenever the government makes cutbacks on benefits, refuses to pay public sector workers a fair wage, cuts payments to local authorities, or generally does anything in the name of Austerity – justified by saying that state finances are in a mess and the deficit is too high – the real reason there is a shortage of money is because the wealthy elite are being allowed to get away without paying their fair-share of tax (Tax Avoidance is estimated to cost the country £95bn/year) and the rest of us all have to pay for it. And that won’t change until we stop political parties being funded, and therefore controlled, by the wealthy elite.

https://www.theguardian.com/politics/2011/feb/08/tory-funds-half-city-banks-financial-sector

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