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Hey Corporations, It’s Time to Stop Avoiding Taxes

Murray Worthy, Senior Campaigner at non profit War on Want, discusses the legacy of corporations and tax evasion.

Tax can do great things. Taxation can fund public services like healthcare and education and it can redistribute wealth to eliminate poverty and inequality. For any government anywhere in the world tax revenues are vital to meeting the basic needs of their citizens. Yet all too often for many of the world’s largest companies like Amazon, Google and Starbucks paying tax is little more than a choice.

The scale of this global scandal is truly staggering. It is now estimated that up to £20 trillion is now held in secrecy jurisdictions, better known as tax havens. Tax havens allow rich individuals to hide money from tax inspectors and allow multinational companies to shift their profits out of the countries where they make their money into tax havens where they can pay less tax. This wealth held in tax havens is more than the annual economic output of the UK and US economies combined. If that money were taxed instead it could generate twice the amount all rich countries spend on overseas aid or more than the UK spends on the NHS and education put together. It is hard to underestimate the positive impact this money could make.

Over the last few years, pressure from the public has forced tax avoidance from an obscure technical issue to the top of the government’s agenda. In the last year alone the Chancellor George Osborne described tax avoidance as “morally repugnant“ and Prime Minister David Cameron has said that “there are too many tax havens, too many places where people and businesses manage to avoid paying taxes,” pledging firm action this year as the UK takes up the presidency of the G8.

This recognition by the government of the need to act is a unique opportunity, with the potential to achieve real change to tackle companies’ abuse of tax laws around the world. Yet at the moment we risk falling far short. In the Budget in March, the government is set to introduce new rules aimed at tackling the abuse of the UK’s tax laws, the centrepiece of the government’s plans to tackle tax avoidance. Yet our research has shown that rather than tackling tax avoidance, it would have had little impact on the most high profile recent tax avoidance scandals including those involving Amazon, Starbucks, Google, Jimmy Carr or senior civil servants. These proposals also risk making things worse, by defining what is wrong so narrowly it could actually encourage more companies to avoid tax.

The UK is not only a victim of tax avoidance; it also plays a key role in the global system that allows big companies and rich individuals to avoid tax in countries all around the world through its global network of tax havens. UK-linked tax havens such as the Cayman Islands, Jersey, the British Virgin Islands and Bermuda rank as some of the most significant tax havens in the world, with devastating impacts on the abilities of countries around the world to raise taxes and fund public services.

Pressure from campaigners has opened up a unique opportunity to tackle tax avoidance and the tax havens that fuel them, yet it is only through people taking action that we can turn that opportunity into reality and make a real difference. We can ensure the government’s actions don’t fall short of what is needed.

Instead of introducing a weak and ineffective “anti-abuse” rule the government could instead introduce a General Anti-Avoidance Principle aimed at eliminating tax avoidance, giving tax inspectors strong powers to take on companies that exploit the UK’s tax laws. According to our research, this measure alone could recover £5.5 billion of the £25 billion lost to tax avoidance every year in the UK. The Prime Minister has said that action is needed to tackle tax havens, if this government is to play its part in that then it must take action to end the secrecy in the UK’s own tax havens and end their damaging impacts around the world.

Take action now and call on Chancellor of the Exchequer, George Osborne, to take action to stop the UK fuelling tax avoidance around the world, and instead ensure that all countries are better able to raise taxes to pay for vital public services and to tackle poverty and inequality.

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