Osborne’s Wednesday statement, when he will be forced to admit he will miss his target to be cutting debt as a share of GDP by 2015-6 and that he will be extending spending cuts to 2018, is going to be wretched.
So he will try to enliven the House, and the nation, by telling us he’s imposing a £10bn purge on multi-national tax-dodgers. This is made up of £2bn he claims will eventually be raised by focusing HMRC on multi-nationals, the wealthy, and offshore evasion, particularly ‘transfer pricing’ whereby companies shift profits made in the UK to low tax jurisdictions in order to pay only a fraction of the tax really due.
The other £5bn (yes, you’ve noticed, it doesn’t add up to £10bn or anywhere near it) is supposed to come from a deal with Switzerland which he alleges will raise the revenue over 6 years, i.e. at an average rate of £1.2bn a year. This ‘crackdown’ therefore at best will yield £1-3bn over the next 5 years, which compares with HMRC’s tally of tax avoidance of £35bn or so every year. Not much cop really, but it gets worse.
Most obviously, why wasn’t this done long before (since it’s clearly been triggered by the PAC outburst against Starbucks, Google and Amazon), and why is it so modest? Why is it being accompanied at the same time by other measures taken by the government which will actively promote tax avoidance, most notably the cut in tax on multi-nationals which open a finance company in a tax haven from the present 23% rate to just 5.5% in January 2014?
Why has the government continued to turn a blind eye to the massive loophole that allows companies or individuals (including foreigners) to use an offshore entity to buy (very expensive) property in the UK, under the name of a nominee whose identity is known to the Land Registry but withheld from HMRC, and thus escape any liability to stamp duty, inheritance tax and capital gains tax?
A staggering $21 trillions (£13tn) is estimated by the consultancy McKinsey’s chief economist to be held currently in tax havens. Since many of these are UK Overseas Territories or Crown Dependencies, why doesn’t the government demand full access to deposits held there by UK account holders, with the sanction that if they fail to do so, the UK government will no longer accept any of their financial transactions with the UK as legal.
And why is the government pushing to introduce GAAR (a General Anti-Avoidance Rule) next year which will target so-called aggressive tax avoidance and thus narrow the attack on tax avoidance to its most egregious examples (with the implication that everything outside the GAAR is therefore legitimised), rather than looking at the intention, i.e. if the primary purpose of a scheme is clearly tax avoidance rather than any substantive economic transaction, then it should be declared null and void?