What would Clement do?

A Labour blog that witters on about Clement Attlee. Hurrah for The Major!

Archive for the tag “Tax Avoidance”

DEATH & TAXES PART TWO – ITS THIS STUPID ECONOMY, STUPID!!!!

Last Sunday, The Observer newspaper did a service to the people of the world, although in a week when pointless metal-encased flames and uniformly branded sportswear are the biggest news in town, you would look hard in the rest of the British media to find out.

In a series of articles, and in conjunction with the campaign group Tax Justice Network, London’s most venerable liberal(ish) weekly exposed the true state of the world economy. It is not a pretty sight, but at last, we critics of trickle-down free market horseshit have some reasonably accurate figures to throw back at Adam Smith/Cato Institute blowhards. Not to mention third wayers like Progress…

The former Chief Economist at McKinsey, Mr James Henry has just produced the most detailed estimates of the offshore economy – you know, all that moolah stashed away in tax havens from the Caribbean to the Channel Islands, by way of Switzerland and Lichtenstein. This is forensic accounting at its best, echoing the work over the years of Mr “follow the money”, Greg Palast. 

To quote from the front page:

Their wealth’s, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy.”

Helpfully, the report can quantify in numbers both the approximate number of individuals and what the probably keep hidden, although the report is careful not to attempt to put a price on the number of apartments in Chelsea, Canalettos on the wall, or Van Gogh sketches owned by this global elite. The figures are pretty instructive:

  1. The Approximate amount of wealth held “offshore” in tax havens – £13 TRILLION to £20 TRILLION. Thats between $21 and $32 TRILLION.
  2. The approximation number of people hiding money offshore around the globe – ten million. 
  3. Estimated amount owned by just 92,000 of the above ten million – $9.8 TRILLION.

I suppose that we can now put a number on the size of our true global Ruling Class, and, as a result, we know have to radically rethink our idea of the gap between the rich and poor, as both the poor and the very rich are now palpably underrepresented. It also puts the supposed “death of class politics” (TM Mssrs P. Mandelson, W. Clinton, A.L.Blair) into its proper perspective.

Typically, the biggest losers in the period measured, from the 1970’s to 2010, have been Oil and Mineral rich developing nations and the former Soviet bloc. Russia lost $798 Billion since 1990, the Ukraine $167 Billion,  & the Kazakhs $138 Billion. Predictably, Africa has suffered badly, Nigeria bleeding $306 Billion and Ivory Coast $141 Billion respectively. 

But these are notorious Kleptocracies surely? This doesn’t happen in Democracies does it? Err, yup ‘fraud so – Mexico lost $417 Billion, Venezuela $406 Billion, Brazil a whopping $520 Billion. to name but three…

Fans of the Chinese model of free market dictatorship will be ashamed to learn that since the 1980’s, her economy has lost a staggering $1,189 Billion to offshore tax havens. The rest of us are not all that surprised…

To put this in perspective, if the Super Rich paid only 30% tax on their interest, it would amount to more than the rich economies spend in a year on aid – some $189 Billion. (That’s if they only “earned” 3% interest)

The figure of £13 Trillion is a sum that dwarfs the combined economies of the USA and Japan.

Under increased pressure to do at least something, the British Government recently entered into the mother of all sweetheart deals with Switzerland and its Bankers – UK residents are going to be able to make a one-time payment of between 21% and 41% to clear the slate on undeclared assets. This allows tax dodgers to still avoid both the current 50% top tax rate, and the future 45% rate.

One of the most industrious founders of the UK-based tax haven industry was reportedly one Ian Cameron, father of the Right Honourable David Cameron, our Prime Minister.

The Mayor of London, Boris Johnson, has repeatedly made statements to the effect that, since 2008, it is time to stop “bashing bankers” and let them get on with it, and his hopes to make the City of London some sort of “haven” for international finance. He also trousers £250,000 per annum for writing a column for Telegraph Newspapers, owned by the Barclay brothers, who are all registered offshore for tax purposes. This amount is somewhat more than his substantial salary for running our Capital City. There is, of course, no suggestion of any linkage here.

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Death And Taxes – Part One…

It used to be said that you could avoid everything in life except these two constants. Since Margaret Thatcher came to power however, the situation has become a little different…

In the 32 years since Margaret Thatcher came to power, and more spectacularly since the “Big Bang” in The City in 1987, what was once a shady corner of Finance has become a major activity worldwide – “Tax Optimisation”, or Tax Avoidance to you and me.

Simply put, the rich and big businesses, whether Barclays Bank, TopShop or Tesco use legal loopholes and financial skulduggery to avoid paying taxes that you or I cannot avoid. If you run a small business, or manage an outlet for a large company, please be warned that the following may lead you to never voting Tory again…

Historically, the Thatcher/Lawson years were a watershed, with the burden of taxation moved from  progressive Income Tax with more paid the more you earn to consumption-based taxes such as VAT, which had its scope moved from” luxury” goods to more and more of the basics of life. Now taxes on consumption may not always be a bad thing, but as a proportion of income, they hit those on middle and poorer incomes at a greater rate than they do the rich. Simply put, you can only consume so much. By 1987, according to statistics released by The Treasury, the burden of taxation was exactly the same as it had been in 1979 – 33%, but it had been shifted down to the lower earning brackets.

It took John Majors’ Government to further reduce the Income Tax bands, so that the higher rate of tax was only 40%. Even under Lawson, there had been a marginal rate of 60% for the very rich corporation tax was also lowered throughout the period, to make Britain a “haven for foreign investment”, along with plenty of our money paid as sweeteners to multinationals to come here. And there it has stayed. One of the major failures of New Labour was its insistence on following Conservative economic policies that hurt those in the middle and below, whilst fawning over those in clover. For all the good done over the past thirteen years reducing Child Poverty, refunding the NHS and Education, our party could, and should have done more.

One of the worst areas of inaction was over closing tax loopholes used by the wealthy to avoid even low rates of tax. So in awe of the rich were Blair, Brown and Mandleson, that they gave peerages to people such as Fred Goodwin, then Head of RBS, Philip Green at TopShop and their international guru, Alan Greenspan.

The international super-rich flocked to Mayfair, Kensington and Chelsea, much to the chagrin of the merely very rich City types, who moaned loudly that they could now “only” afford to live in Richmond or Barnes; oh how we did not weep for them. But in spite of  everything done for them, they wanted more. The Billionaires from India, Russia, and China had moved here because their “non-dom” status meant that they could pay almost no tax whatsoever, and homegrown tycoons followed suit. as Robert Peston mentioned in his book about the crash, TopShops boss, Sir Philip Green gets his salary paid to his wife, who for tax purposes is based in Monaco. He is not alone. More worryingly, he is an advisor to the present Government on Business Affairs. This is not just an economic outlook, but also a moral one, as ex-City millionaire David Laws, who was sacked for fiddling £40,000 out of the public purse last year, looks set to rejoin the Government in some position this April.

Yet the Government is unlikely to do much without outside pressure, as a Cabinet with a high proportion of ex-City types, such as Chris Huhne, and sons of stockbrokers such as David Cameron make all the right noises to placate the rich, whilst telling us that “we are all in this together”. Recently it came to light that since 2005, donations to the Tory Party from City sources had reached over fifty percent of its total funding – many from the very hedge fund managers who got us in this mess whilst avoiding taxes here. In January, at the annual Black and White party ( they daren’t call it a ball anymore), secure in Battersea Park, City Internships were auctioned-off to the highest bidder, in aid off Tory Party funds. Perhaps this is the “Big Society”? A short walk away are some of the roughest and most deprived estates in London.

The Mayor of London, Boris Johnson was also in attendance, and as many have noted, has spent much of the past year or so loudly protesting that we must stop “bashing Bankers” over the billions of our money we had to throw at them to save the system. Let us not forget that in 2009 he publicly decried his £250,000 per year stipend from The Daily Telegraph as mere “chickenfeed”. It seems we have not a Mayor for all of London, but TWO Lord Mayors of The City of London…

(Part Two to follow soon…)

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