Tax avoidance costs UK economy £69.9 billion a year

New report from the Tax Justice Network highlights the staggering extent of global tax evasion.

In March earlier this year The Spectator published an article 'Debunking UK Uncut' over their campaign against tax avoidance. The author -- Nick Hayns from the Institute for Economic Affairs -- pleaded with readers not to let "UK Uncut get away with throwing all logic out of the window." But as nations across Europe feel the sting of reduced living standards, the true extent of global tax avoidance -- as revealed today by the Tax Justice Network -- will act to bolster feelings that such injustice can no longer be swept aside with the kind of insouciance Hayn displays.

The research, based on data from 145 countries, shows that tax evasion costs those nations $3.1 trillion annually. In the UK's case £69.9 billion is lost on a yearly basis in what the Tax Justice Network call the "shadow economy." That figure, they point out, "represents 56% of the country's total healthcare spend."

On the back of this report the Tax Justice Network has launched its campaign to Tackle Tax Havens. An initiative aimed at propelling tax avoidance up the political agenda by highlighting, in simple terms, the sheer scale of the sums involved and how they translate into increased cuts in public services for the rest of us.

But is tax avoidance immoral? Toby Young wrote for The Telegraph back in February that "Tax avoidance isn't morally wrong. It's perfectly sensible behaviour." While it might be true from a purely business point of view that tax avoidance is a great way to boost profits, Young conflates what is logical for a business to do, with what is the right thing to do from a societal or moral point of view.

Curiously while parts of the rightwing commentariat insist that deficit reduction is the number one task, they seem little interested in measures that might actually reduce the deficit, namely ensuring companies pay the tax they owe.

"Tax evasion is morally repugnant...It's stealing from law-abiding people, who face higher taxes to make good the lost revenue." This quote could well come from one of the much derided Occupy LSX group, but no, it's our very own Conservative chancellor. The Institute of Directors' have also supported proposals from QC Graham Aaronson to implement a general anti-avoidance rule that would "deter egregious tax-avoidance".

So could the tide finally be turning for those who cheat the system? Richard Murphy of Tax Research UK, that undertook the research for the Tax Justice Network, says: "If only more had been done to tackle rampant tax evasion, Europe would not be facing a crisis today." Adding that to compel both business and the tax havens themselves to be transparent in their dealings would "shatter the secrecy of tax havens for good." Nothing, he goes on, "could make a bigger contribution than this to solving the world's financial crisis".

In response in this article, Chief Executive of Jersey Finance Ltd, Geoff Cook, submitted the following letter:

"Tax evasion" is the illegal concealment of a taxable activity and, to be clear, is a criminal offence in Jersey. "Tax avoidance", on the other hand, is legal and refers to the prudent management of tax affairs to legitimately minimise a company or individual's tax liability within the law. Wide-reaching and thorough regulatory and compliance procedures are fundamental components of how a world-class International Financial Centre (IFC) like Jersey operates.

While the concept of tax avoidance, or perhaps as it may be better described, tax planning, is often discussed in relation to business, the exact same principle applies to individuals from all walks of life. Anyone who chooses to invest in an ISA or a pension could be accused of seeking to "avoid tax"; yet it is plain that such activity is not only legal, but also prudent and sensible.

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Winning Scottish independence will be even harder than before - but it may be the only choice

Independence campaigners will have to find answers on borders, currency and more. 

The Brexit mutiny has taken not just the UK economy and its relationship with Europe into uncharted waters. it has also imperilled the union between Scotland and England. From Sir John Major to the First Minister, both Unionists and Nationalists had warned of it. The outcome, though, has made this certain. The Leave vote in England and Wales contrasted with an overwhelming Remain vote north of the border.

That every region in Scotland voted to stay In was quite remarkable. Historically, fishing and industrial communities have blamed the European Union for their woes. That antagonism was probably reflected in lower turnout - an abstention rather than a rejection. 

The talk now is of a second referendum on independence. This is understandable given the current mood. Opinion polls in the Sunday Times and Sunday Post showed a Yes vote now at 52 per cent and 59 per cent respectively. Moreover, anecdotal evidence suggests even arch No vote campaigners, from JK Rowling to the Daily Record, are considering the option.

The First Minister was therefore correct to say that a second referendum is now “back on the table”. Her core supporters expects no less. However, as with the economy and Europe, the constitutional relationship between Scotland and England is now in uncharted seas. Potential support for independence may be higher, but the challenges are arguably bigger than before. The difficulties are practical, political and geographic.

Of course the Little Englanders likely to take the helm may choose a velvet divorce. However, given their desire for the return of the Glories of Britannia that’s improbable. They’re as likely to wish to see Caledonia depart, as cede Gibraltar to Spain, even though that territory voted even more overwhelmingly In.

Ticking the legal boxes

Practically, there’s the obstacle of obtaining a legal and binding referendum. The past vote was based on the Edinburgh Agreement and legislation in Westminster and Holyrood. The First Minister has indicated the democratic arguments of the rights of the Scots. However, that’s unlikely to hold much sway. A right-wing centralist Spanish government has been willing to face down demands for autonomy in Catalonia. Would the newly-emboldened Great Britain be any different?

There are no doubt ways in which democratic public support can be sought. The Scottish Government may win backing in Holyrood from the Greens. However, consent for such action would need to be obtained from the Presiding Officer and the Lord Advocate, both of whom have a key role in legislation. These office holders have changed since the first referendum, where they were both more sympathetic and the legal basis clearer. 

Getting the EU on side

The political hurdles are, also, greater this time than before. Previously the arguments were over how and when Scotland could join the EU, although all accepted ultimately she could remain or become a member. This time the demand is that Scotland should remain and the rest of the UK can depart. But will that be possible? The political earthquake that erupted south of the Border has set tectonic plates shifting, not just in the British isles but across the European continent. The fear that a Brexit would empower dark forces in the EU may come to pass. Will the EU that the UK is about to leave be there for an independent Scotland to join? We cannot know, whatever European Commission President Jean-Claude Juncker may be saying at the moment. The First Minister is right to start engaging with Europe directly. But events such as elections in France and the Netherlands are outwith her control. 

Moreover, currency was the Achilles heel in the last referendum, and hasn’t yet been addressed. George Osborne was adamant in his rejection of a currency union. The options this time round, whether a separate Scottish currency or joining the euro, have yet to be properly explored. A worsened financial situation in the 27 remaining EU members hampers the latter and the former remains politically problematic. 

The problem of borders

Geography is also an obstacle  that will be even harder to address now than before. Scotland can change its constitution, but it cannot alter its location on a shared island. In 2014, the independence argument was simply about changing the political union. Other unions, whether monarchy or social, would remain untouched. The island would remain seamless, without border posts. An independent Scotland, whether in or out of the EU, would almost certainly have to face these issues. That is a significant change from before, and the effect on public opinion unknown.

The risk that's worth it

Ultimately, the bar for a Yes vote may be higher, but the Scots may still be prepared to jump it. As with Ireland in 1920, facing any risk may be better than remaining in the British realm. Boris Johnson as Prime Minister would certainly encourage that. 

David Cameron's lack of sensitivity after the independence referendum fuelled the Scottish National Party surge. But perhaps this time, the new Government will be magnanimous towards Scotland and move to federalism. The Nordic Union offers an example to be explored. Left-wing commentators have called for a progressive alliance to remove the Tories and offer a multi-option referendum on Scotland’s constitution. But that is dependent on SNP and Labour being prepared to work together, and win the debate in England and Wales.

So, Indy Ref The Sequel is on the table. It won’t be the same as the first, and it will be more challenging. But, if there is no plausible alternative, Scots may consider it the only option.

Kenny MacAskill served as a Scottish National MSP between 2007 and 2016, and as Cabinet Secretary for Justice between 2007 and 2014.