Tax dodging by foreign companies risks rendering aid pointless

The amount lost to foreign countries through tax dodging far outstrips the aid budget – and it could get worse.

From caravans, to pasties and grannies, the tax U-turns performed by the Government after the Budget last March have been well documented. But a much more fundamental shift in tax code, which will make it far easier for the biggest multinationals to make even greater use of tax havens has gone almost unnoticed.

Changes to obscure sounding Controlled Foreign Company (CFC) rules radically weaken the UK’s anti-tax haven abuse regime. Not only will they cost the UK almost £1 billion in lost revenues, ActionAid estimates they could also cost developing countries £4 billion a year.

Following a nine month investigation into the importance of tax revenues for developing countries, the cross-party International Development Select Committee are today calling on the Government to drop its CFC changes if a Treasury assessment finds that it will do harm.

Sir Malcolm Bruce MP, Chair of the Committee, argued that "it would be deeply unfortunate if the Government’s [aid] efforts were undermined by its own tax rules." A loss of £4bn is roughly half the British aid budget.

At present, the Treasury refuses to undertake an impact assessment – in spite of recommendations from IMF, World Bank and UN, alongside calls from thousands of ActionAid supporters around the country.

The International Development Committee (IDC) report also recognises the fundamental importance of helping developing countries to increase their own tax revenues, enabling them to put more teachers in schools and nurses in hospitals. Ultimately, improving their ability to collect tax will enable poor countries to end aid dependency.

The committee calls on the Department for International Development to give a higher priority to helping the developing world improve its tax base. Ministerial oversight is vital to ensure that future moves by the Treasury don’t come at the expense of some of the world’s poorest countries.

The report echoes the calls of tax justice campaigners for much greater transparency in the way both multinational companies and tax havens operate. In particular the report highlights the need for the Treasury to press the Channel Islands and the Isle of Man to make the financial accounts of subsidiary companies registered there publicly available.

The OECD currently estimates that developing countries lose three times more to tax havens than they receive in aid each year. Any measures which help prevent this vast out-flow of vital resources could have a transformative effect on the lives of millions of poor people.

The challenge to Government laid down by the IDC is clear. The question is – will they listen?

Uncanny Valley: George Osborne and Mitt Romney spoke during the latter's visit to Britain. Photograph: Getty Images

Chris Jordan is a Tax Justice Campaigner for ActionAid

Getty
Show Hide image

Junior doctors’ strikes: the greatest union failure in a generation

The first wave of junior doctor contract impositions began this week. Here’s how the BMA union failed junior doctors.

In Robert Tressell’s novel, The Ragged-Trousered Philanthropists, the author ridicules the notion of work as a virtuous end per se:

“And when you are all dragging out a miserable existence, gasping for breath or dying for want of air, if one of your number suggests smashing a hole in the side of one of the gasometers, you will all fall upon him in the name of law and order.”

Tressell’s characters are subdued and eroded by the daily disgraces of working life; casualised labour, poor working conditions, debt and poverty.

Although the Junior Doctors’ dispute is a far cry from the Edwardian working-poor, the eruption of fervour from Junior Doctors during the dispute channelled similar overtones of dire working standards, systemic abuse, and a spiralling accrual of discontent at the notion of “noble” work as a reward in itself. 

While the days of union activity precipitating governmental collapse are long over, the BMA (British Medical Association) mandate for industrial action occurred in a favourable context that the trade union movement has not witnessed in decades. 

Not only did members vote overwhelmingly for industrial action with the confidence of a wider public, but as a representative of an ostensibly middle-class profession with an irreplaceable skillset, the BMA had the necessary cultural capital to make its case regularly in media print and TV – a privilege routinely denied to almost all other striking workers.

Even the Labour party, which displays parliamentary reluctance in supporting outright strike action, had key members of the leadership join protests in a spectacle inconceivable just a few years earlier under the leadership of “Red Ed”.

Despite these advantageous circumstances, the first wave of contract impositions began this week. The great failures of the BMA are entirely self-inflicted: its deference to conservative narratives, an overestimation of its own method, and woeful ignorance of the difference between a trade dispute and moralising conundrums.

These right-wing discourses have assumed various metamorphoses, but at their core rest charges of immorality and betrayal – to themselves, to the profession, and ultimately to the country. These narratives have been successfully deployed since as far back as the First World War to delegitimise strikes as immoral and “un-British” – something that has remarkably haunted mainstream left-wing and union politics for over 100 years.

Unfortunately, the BMA has inherited this doubt and suspicion. Tellingly, a direct missive from the state machinery that the BMA was “trying to topple the government” helped reinforce the same historic fears of betrayal and unpatriotic behaviour that somehow crossed a sentient threshold.

Often this led to abstract and cynical theorising such as whether doctors would return to work in the face of fantastical terrorist attacks, distracting the BMA from the trade dispute at hand.

In time, with much complicity from the BMA, direct action is slowly substituted for direct inaction with no real purpose and focus ever-shifting from the contract. The health service is superficially lamented as under-resourced and underfunded, yes, but certainly no serious plan or comment on how political factors and ideologies have contributed to its present condition.

There is little to be said by the BMA for how responsibility for welfare provision lay with government rather than individual doctors; virtually nothing on the role of austerity policies; and total silence on how neoliberal policies act as a system of corporate welfare, eliciting government action when in the direct interests of corporatism.

In place of safeguards demanded by the grassroots, there are instead vague quick-fixes. Indeed, there can be no protections for whistleblowers without recourse to definable and tested legal safeguards. There are limited incentives for compliance by employers because of atomised union representation and there can be no exposure of a failing system when workers are treated as passive objects requiring ever-greater regulation.

In many ways, the BMA exists as the archetypal “union for a union’s sake”, whose material and functional interest is largely self-intuitive. The preservation of the union as an entity is an end in itself.

Addressing conflict in a manner consistent with corporate and business frameworks, there remains at all times overarching emphasis on stability (“the BMA is the only union for doctors”), controlled compromise (“this is the best deal we can get”) and appeasement to “greater” interests (“think of the patients”). These are reiterated even when diametrically opposed to its own members or irrelevant to the trade dispute.

With great chutzpah, the BMA often moves from one impasse to the next, framing defeats as somehow in the interests of the membership. Channels of communication between hierarchy and members remain opaque, allowing decisions such as revocation of the democratic mandate for industrial action to be made with frightening informality.

Pointedly, although the BMA often appears to be doing nothing, the hierarchy is in fact continually defining the scope of choice available to members – silence equals facilitation and de facto acceptance of imposition. You don’t get a sense of cumulative unionism ready to inspire its members towards a swift and decisive victory.

The BMA has woefully wasted the potential for direct action. It has encouraged a passive and pessimistic malaise among its remaining membership and presided over the most spectacular failure of union representation in a generation.

Ahmed Wakas Khan is a junior doctor, freelance journalist and editorials lead at The Platform. He tweets @SireAhmed.