The government's "patent box" is the tax avoidance package companies have been begging for

It might incentivise innovation, but it definitely incentivises paying far less tax.

The Conservative party back-benches are seething with rebellion. Not only do ministers deplore David Cameron for an un-Tory like attitude toward gay marriage, in recent weeks he has further upset them with a positively radical spiel directed against those super-corporations the conservative leader suspects of tax avoidance:

Any businesses who think that they can carry on dodging their fair share ... need to wake up and smell the coffee.

However. Refreshing though the rhetoric certainly is, the actions of the Government seem to tell a different story. Corporation tax will have fallen from 28 per cent to 21 per cent toward the end of the Government’s first term in 2014 — and this will translate into a loss of roughly £5 billion in tax revenues each year as those cuts are enacted (according to 2011 estimations by the Treasury).

The buck doesn’t stop there. In order to better facilitate corporate needs, HM Revenue and Customs is set to introduce a new form of tax relief for businesses due to begin in April this year. It’s called the Patent Box. Ostensibly, it means that a company which shows sufficient innovative nous by patenting innovations will be entitled to a tax break of 13 per cent, applied to the value of the product. In theory this should provide impetus for companies to conceive fabulous new technologies, and give a spurt to growth and development thereby. Right?

Well not quite. The first problem is that said companies are not actually required to own the patent themselves in order to attain the tax break. They can simply lease a patent from the original patent owner; consequently there is no real incentive to invent stuff creatively and in-house, so to speak. But the most salient fact about the Patent Box is that it does not apply to the patent in isolation. A company could, for instance, produce a tractor, and if that tractor was possessed of a patented right view mirror, the revenue from the whole vehicle itself — not only the mirror — would be subject to same overall and significantly larger cut in tax.

In other words, a measure which appears to contain a degree of legitimacy, in fact becomes yet another way for big corporations to achieve massive, unwarranted tax slashes on their products. And this is ironic. The Conservatives always pride themselves on encouraging small business development, perhaps because this provides a highly effective propaganda sheen — allowing their PR initiatives to be expressed in terms of hard working individuals and entrepreneurs rather than faceless corporate monoliths. But the Patent Box will only serve the latter. Small businesses do not have the purchasing power to buy in bulk the products which will benefit from the tax cut, nor can they afford to gamble with new technological innovations, nor can they divert money into buying up the patents of others.

Part of the whole problem lies in the way in which the government develops Controlled Foreign Companies (CFCs) regulations. One of the lead advisors who helped the government to devise the Patent Box was one Jonathan Bridges — a tax advisor for KPMG, an accountancy company which has no remit outside ensuring the lowest tax returns for its corporate clientèle; it has, therefore, no commitment to any notional "national interest".

The use of the representatives of corporate power to provide advice on the means by which that power should be channelled in socially effective ways makes about as much sense as employing a local war lord to advise on the committee of Amnesty International. But despite its connotations, the practise of employing huge corporations to help devise precisely the laws which are supposed to regulate them is one which both the current and the previous Government have engaged in. At the time of the transition to the coalition government, Labour had already set up working groups for consultations regarding CFC reforms; panels which included representatives of HSBC, Vodafone and Shell — all major multi-nationals and all involved in controversies regarding tax evasion.

The current Government has an objective rationale for its position which isn’t simply an expression of neo-liberal ideology and partisan politics. These super-companies have genuine power — and the ability to decamp to another country taking thousands of jobs with them. Like petulant, spoiled children, they are always on the verge of tantrum, should their desires not at once be met. In the midst of an economic crisis there is a cogent argument that any single Government must of necessity make their tax rates as favourable as possible in order to attract those companies and secure those jobs.

But the problem with such an argument lies in its generalisation. If every government follows suit, slashing corporate tax over and over in order to remain competitive, and if all governments adhere to the strictures of such competition, we are at once locked into a downward spiral, a race to the bottom in which the benefits gained from corporation tax are increasingly illusory.

And it is important to recognise that this is exactly the type of cycle which got us here in the first place. We were sold on the need to slash regulations in the finance industry, and look what happened. By playing this game the government are not responding pro-actively to the crisis, they are adopting the very logic which led to it.

How can these companies be regulated? By people putting pressure on their governments for sure. But also by directly targeting the companies themselves through grass-roots activity and customer boycotts. Following mass protest, Starbucks was recently "persuaded" to agree to pay £10m in corporation tax in the UK for each of the next two years. A drop in the ocean certainly. But nevertheless an indication that, ultimately, it is the consumer who has the ability to make or break a company.

Innovate on the mirror, profit on the tractor. Photograph: Getty Images
Photo: Bulent Kilic/Getty Images
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We need to talk about the origins of the refugee crisis

Climate change, as much as Isis, is driving Europe's migrant crisis, says Barry Gardiner. 

Leaders get things wrong. Of course they do. They have imperfect information. They face competing political pressures. Ultimately they are human. The mark of a bad leader is not to make the wrong decision. It is to make no decision at all.

David Cameron’s paralysis over the unfolding human tragedy of Syrian refugees should haunt him for the rest of his natural life. At a time when political and moral leadership was most called for he has maintained the most cowardly silence. 

All summer, as Italy, Greece, Hungary and Macedonia have been trying to cope with the largest migration of people this continent has seen in 70 years, Downing Street has kept putting out spokespeople to claim the government is working harder than any other country “to solve the causes of the crisis” and that this justifies the UK’s refusal to take more than the 216 refugees it has so far admitted directly from Syria. The truth is it hasn’t and it doesn’t.

Anyone who truly wants to solve the causes of the nightmare that is Syria today must look beyond the vicious and repressive regime of Assad or the opportunistic barbarism of ISIL. They need to understand why it was that hundreds of thousands of ruined farmers from Al-Hasakeh, Deir Ezzor and AL-Raqqa in the northeast of that country flocked to the cities in search of government assistance in the first place - only to find it did not exist.

Back in 2010 just after David Cameron became Prime Minister, the UN Food and Agriculture Organisation warned that, after the longest and most severe drought in Syria, since records began in 1900, 3 million Syrians were facing extreme poverty. In 2011 the International Institute for Strategic Studies published a report claiming that climate change “will increase the risks of resource shortages, mass migration and civil conflict”. These were some of the deep causes of the Syrian civil war just as they are the deep causes of the conflicts in Tunisia, South Sudan, Somalia, Libya and Egypt. So what about Cameron’s claim that his government has been working to solve them?

Two years after that Institute for Strategic Studies report pointed out that conflict as a result of  drought in countries like Ethiopia, Eritrea and Somalia had already claimed 600,000 lives,  the parliamentary Committee on Arms Export Controls found the UK Government had issued more than 3,000 export licenses for military and intelligence equipment worth a total of £12.3bn to countries which were on its own official list for human rights abuses; including to Libya, Tunisia, Somalia, Sudan, Egypt and Syria. That was the same year that UK aid to Africa was cut by 7.4% to just £3.4billion. Working to solve the root causes? Or working to fuel the ongoing conflict?

A year later in 2014 home office minister, James Brokenshire told the House of Commons that the government would no longer provide support to the Mare Nostrum operation that was estimated to have saved the lives of more than 150,000 refugees in the Mediterranean, because it was providing what the government called a “pull factor”. He said: “The government believes the most effective way to prevent refugees and migrants attempting this dangerous crossing, is to focus our attention on countries of origin and transit, as well as taking steps to fight the people smugglers who wilfully put lives at risk by packing migrants into unseaworthy boats.”

In fact the ending of the rescue operation did not reduce the number of refugees. It was not after all a “pull factor” but the push factor – what was happening in Syria - that proved most important. Earlier this summer, David Cameron indicated that he believed the UK should consider joining the United States in the bombing campaign against Isis in Syria, yet we know that for every refugee fleeing persecution under Assad, or the murderous thuggery of ISIS, there is another fleeing the bombing of their city by the United States in its attempt to degrade ISIS.  The bombing of one’s home is a powerful push factor.

The UK has not even fulfilled Brokenshire’s promise to fight the people smugglers. The Financial Action Task Force has reported that human trafficking generates proportionately fewer Suspicious Activity Reports (SARs) annually than other comparable crimes because the level of awareness is lower. Prosecuting the heads of the trafficking networks has not been a focus of government activity. Scarcely a dozen minor operatives pushing boats on the shores of Turkey have actually been arrested. But it is not the minnows that the UK government should be concentrating on. It is their bosses with a bank account in London where a series of remittances are coming in from money transfer businesses in Turkey or North Africa. Ministers should be putting real pressure on UK banks who should be registering SARs so the authorities can investigate and begin to prosecute the ultimate beneficiaries who are driving and orchestrating this human misery. They are not.

That image, which few of us will ever completely erase from our mind, will no doubt prompt David Cameron to make a renewed gesture. An extra million for refugee camps in Jordan, or perhaps a voluntary commitment to take a couple of thousand more refugees under a new European Quota scheme. But if the UK had been serious about tackling the causes of this crisis it had the opportunity in Addis Ababa in July this year at the Funding for Sustainable Development Conference. In fact it failed to bring forward new money for the very climate adaptation that could stem the flow of refugees. In Paris this December the world will try to reach agreement on combating the dangerous climate change that Syria and North Africa are already experiencing. Without agreement there, we in the rich world will have to get used to our trains being disrupted, our borders controls being breached and many more bodies being washed up on our beaches.