Now that Cameron supports tax justice, what must he do about it?

We can’t just rely on companies cleaning up their tax affairs. We need international, intergovernmental action on tax justice, and the UK should deliver it.

When the Prime Minister stands in front of television cameras and uses your campaign slogan, you know something is happening.

On Tuesday in County Armagh, setting out his priorities for the G8 summit that the UK will host next June, David Cameron put the fight against tax dodging at the top of his international agenda:

“I want to us to achieve tax justice in our world, so that big companies pay their taxes”.

The focus on tax is not entirely a surprise. This year’s mountain of news stories about big companies accused of not paying their fair share is reaching a breaking point. But tax justice is bigger than Starbucks, Amazon or Google. The clever accounting that allows some companies to opt out of the tax system – both in the UK and in some of the poorest countries in the world – is made possible by two features of the international system itself.

This is why Cameron putting tax justice on the international agenda marks a new, important and hopeful shift in the government’s previously underpowered response to the global haemorrhage of public revenues.

First, international tax rules are desperately ill-equipped to meet the challenges of globalised business. They are powerless to stop profits being shifted into tax havens, and out of the countries where real sales are made, real people employed, real goods produced. Last week’s public scrutiny of UK high-street companies has lifted the lid on a bizarre world of goods bought via Swiss subsidiaries, and management services purportedly provided by firms operating from a post-box in the Cayman Islands. This world is dishearteningly familiar to ActionAid researchers, who have traced how multinational companies have used exactly the same strategies (pdf) to shrink their tax bills across Africa and Asia. The tax avoided by just one UK-headed multinational we investigated could, we estimate (pdf), pay to put a quarter of a million children in school in the developing countries where that company operates.

Second, this profit-shifting is possible and profitable thanks to the abusive offshore tax regimes of tax havens (pdf), whose secrecy rules also confound tax inspectors’ attempts to unpick clever accounting tricks, or to locate wealth simply stashed illegally in shell companies and anonymous trusts. Tax havens are not just a drain on scarce public finances. They are an affront to democracy, a deliberate block on legitimate governments’ efforts to raise their own revenues and prevent the corrupt theft of public funds.

On both counts – rebalancing the rules and shutting the tax havens – international agreement and concerted diplomatic muscle is needed. The G8 has come under criticism in recent years. But it remains unusually well-placed to push real international tax reform and prise open the tax havens – 40 per cent (pdf) of which are closely linked to the G8 countries themselves.

How could this be done? First, the G8 could use its weight to make tax havens disclose the wealth and assets that foreign companies and individuals funnel into their jurisdictions. The agreements to do this already exist. Tax havens should sign them, or face serious financial countermeasures. Second, we need to unlock the corporate "black boxes" into which tax haven-held assets are currently stuffed. To tear down the veil of offshore secrecy we need a legally-binding global standard, simply requiring the real, human owners of anonymous companies and trusts – their "beneficial ownership" – to be put on public record. A transparency convention with this standard at its heart, launched and signed by the G8, would be a game-changer not just for tax revenues, but for the fight against corruption, money-laundering and international crime – making us better-off, and keeping us safer.

And finally, Cameron has stressed that the G8’s approach to global injustice cannot be about "rich countries doing things to poor countries". It must be about "us putting our own house in order and helping developing countries to prosper". The spring clean must start at home. Before we get to Lough Erne in June, the UK’s own tax avoidance regime needs to be made fit for purpose: capable of protecting UK revenues, and closing the UK tax loopholes (pdf) that leach money out of developing countries too. The budget next spring is the place to do it.

This is a fight that could transform the UK’s public finances, ensure that scarce UK aid is not undermined by the haemorrhage of developing countries’ revenues, and ultimately allow those countries to fight poverty and hunger with their own resources. In Fermanagh next year we must seize the opportunity with both hands.

Image: ActionAid

Mike Lewis is a tax justice campaigner at ActionAid

Getty.
Show Hide image

Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.