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Hypocrisy upon hypocrisy: welcome to global tax avoidance plc

The latest report from the Public Accounts Committee, published yesterday, really says it all about the tax avoiders. The head of tax for Ernst & Young, one of the UK’s Big Four accountancy firms, admitted that their accountants are seconded to government to draw up tax laws: “I think there are benefits in the work we do with government“. Benefits for Ernst & Young no doubt, but a blatant conflict of interest for the rest of us – join government to write your own tax scam and then profit from telling big business how to get round it.

The accountancy scammers were quick to give assurance that they are required to report to HM’s Revenues & Customs (HMRC) any tailored tax avoidance schemes they offer clients, so that the tax authorities can review them. Sounds foolproof until you realise that multinational tax firms (as all the big ones are) can use offices in other jurisdictions to offer advice without having to notify HMRC. Why isn’t this obvious loophole blocked?

Cameron’s promised crackdown on tax avoidance at the G8 is another format for the birds. He’s proposing:

  1. a global system of information exchange, but it won’t be automatic provision of information and until you know the right questions to ask you won’t get far;
  2. action plans by G8 countries to produce full transparency, but Osborne has just negotiated a much-lauded tax deal with the Swiss which preserved anonymity unhindered;
  3. asking multinational firms to provide accounts of tax paid in every country they operate in, but it’s only voluntary so it won’t get anywhere;
  4. implementing the EU Accounting Directive so that developing countries can ascertain payments made to governments, but the UK itself has been blocking the EU Savings Directive designed to levy a withholding tax on cross-national payments (because the City of London is a world centre in the laundering of money in tax havens). So not much hope there.

There is of course a clear way out of this morass of tax cheating. A General Anti-Tax Avoidance Principle (GANTIP) has been drawn up by Richard Murphy and proposed by me in the House which would empower HMRC, if they judged that an arrangement had no genuine economic substance and that its primary purpose was the avoidance of tax, to strike it down. It would then be invalid, preferably with a deterrent penalty attached to punish companies for trying to cheat. It would be better still if those who fabricated these artificial contrivances were similarly penalised.

But then the real question arises: are we serious about stopping tax avoidance/ evasion, or just hypocrites going through the motions?

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