Good stuff on curbing corporate tax avoidance, Ed, now show us the beef!

‘Make the multinationals transparent about the money they make here, how they move cash round their corporate structures, and the justification for the tax they pay, as well as their responsibilities for the kind of society we want to create’. Ed’s admirable sentiments with which the vast majority of the electorate would concur.

But the real question is: what are the mechanisms which will be used to ensure that these objectives are brought about? They should be at least four.

First and foremost, the UK-controlled Crown Dependencies and Overseas Territories – the British Virgin Islands, Gibraltar, Bermuda, Jersey, Guernsey, Isle of Man, Cayman Islands and the Cook Islands, among others – should be closed down if they fail to offer complete transparency to HMRC, and this should be enforced by regular checks and inspections. The sanction if they fail to comply is that no financial transactions emanating from them would be recognised as valid by the British authorities.

Second, the absurd concessions recently offered to multinationals by Osborne at the instigation of KPMG should be repealed. They are so extreme that corporate tax avoidance in future would hardly even be necessary since he’s serving up to them everything they want on a plate. On 1st January next year Osborne’s cutting tax for big companies with a finance subsidiary in a tax haven from 23% to just 5.5%. When other corporate reliefs can be claimed against tax, this is effectively making many of the biggest UK companies a tax-free zone, when even the poorest workers on subsistence wages have to pay 20% income tax.

Third, the next Labour government must introduce ‘unitary’ taxation for multinationals to counter the manifest pretence of transfer pricing used by Google, Amazon, Starbucks, Tesco, Barclays, among hundreds of others. At present very large profits made across the world are posted to low tax jurisdictions where hardly any tax is chargeable at all, which explains how Google can pay just £3.4m in tax on sales of £3.2 billions taken last year from UK customers. Unitary taxation would require corporate tax to be computed world-wide and then allocated to each country in proportion to the amount of production undertaken there.

Fourth, Labour should introduce a GANTIP Act, i.e. a General Anti-Avoidance Tax Principle Act. This means that if the HMRC can show that the primary purpose of a transaction was tax avoidance rather than any substantive economic purpose, the tax authorities can then strike it down. This would radically undercut all those clever tax avoidance measures dreamed up by over-paid City lawyers and accountants since the latter, and the multinationals employing them, would know that these artificial schemes would never then get anywhere.

So, Ed, tell us that this is what you have in mind, proclaim it loudly, and the electoral benefit for Labour will be huge.