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

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle