December 18, 2017

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The real costs of NHS contracting out -

Sunday, November 26, 2017

The Magic Money Tree -

Saturday, November 4, 2017

The Housing Wonderland by Ian Lewis -

Saturday, October 7, 2017

Will STPs finally wreck the NHS? -

Sunday, June 18, 2017

STPs – A new way to wreck the NHS -

Friday, February 17, 2017

The Magic Money Tree

Once upon a time there was a magic money tree and it paid for the NHS, council housing, schools, unemployment and sickness benefits, pensions, public transport, care homes etc. Every year towards the end of March the tree blossomed; it was the end of the tax year and companies and the rich paid their taxes to nourish the tree and keep it blooming.

The tree no longer blooms; it looks pathetic, devoid of leaves, its branches hanging low, thin and brittle and dying. Older people look at the tree with a mixture of reverence and sadness and realised how lucky their post war generation had been and how different it was for young people today. Student debt, zero hours contracts and sky high rents without any security of tenure.

Multi-national and transnational corporations, signature British companies and a hotch potch of assorted financial services companies employ accountants, especially the big four Deloitte, PwC, EY and KPMG. Their brief is to devise schemes to legally avoid paying tax in the UK and this often involves monies being routed through tax havens.

Whenever politicians are asked about stopping tax avoidance (legal) and tax evasion (illegal), they always reply that it needs international agreement. Reaching an agreement would probably take years and, inevitably, any agreement reached would be very watered down, at best.

But does it really need international agreement for the UK to tackle tax avoidance and tax evasion? Is it not possible for the UK to act on its own?

The Paradise Papers story broke just after I wrote this article and show not only that there is tax avoidance on an industrial scale but that the UK Government is totally complicit in tax avoidance and tax evasion.

There are 3 British Crown Dependencies; the Isle of Man, Jersey and Guernsey and all 3 are tax havens.

There are 14 UK Overseas Territories and 8 are tax havens and they are shown in bold type. Akrotiri & Dhekilia (Cyprus UK military), Anguilla, Bermuda, British Antarctic Territory (research), British Indian Ocean Territory (military base), British Virgin Isles, Cayman Isles,  Falkland Isles, Gibraltar, Monserrat, Pitcairn Islands, St Helena (inc Ascension & Tristan de Cunha), South Georgia, Turks and Caicos Islands.

The Cayman Islands is rated the second best tax haven in the world by multimedia financial services company The Motley Fool1 and also in the top 10 are Isle of Man, Jersey and Bermuda.

Most of the companies registered in these tax havens consist of only a brass plate on a wall or door of a local lawyer. All the administration and paperwork for the companies registered in these tax havens is done in London and there is a reality that the City of London, the square mile, is the world’s largest tax haven.

In case you were wondering which tax haven Motley Fool rates the best; its number 1 is Luxembourg where Jean-Claude Juncker was Prime Minister and/or Finance Minister between 1989 and 2013. His piece de résistance was to allow Vodafone to park £70 billion of debt in Luxembourg, where Vodafone2 didn’t even trade, and create a £17.4 billion tax credit that Vodafone can use in any EU country including the UK.

Today Juncker is President of the European Commission and that hardly gives any confidence for the EU being a serious party to an international agreement to tackle tax avoidance and evasion!!

In reality collecting tax is about political will and the idea of spending years negotiating an international agreement only shows a political will for kicking collecting tax into the long grass. However, there is a much simpler way to collect tax and that is a withholding tax.

A withholding tax is often called a retention tax and, in effect, it’s a payment on account as well as being a mechanism for governments to fight tax avoidance and tax evasion. It can operate similarly to VAT by collecting a set percentage of a company’s sales on a monthly basis.  At the end of the tax year the company produces the actual figures for their tax liability. If the withholding tax has been too high the company will claim back the difference. If the withholding tax has been too low the company will probably be quieter than a church mouse!!

Michael Gold,

@radicalmic
1 https://www.fool.com/investing/general/2016/01/03/10-best-tax-havens-in-the-world.aspx

2 http://www.independent.co.uk/news/business/news/vodafone-courts-new-tax-row-with-transfer-to-luxembourg-haven-9504224.html

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