Twelve steps to stop tax avoidance

Tax avoidance is now endemic, with companies and the wealthy often paying derisory amounts of tax. Public anger has so far met with hollow rhetoric, handwringing and vested interest rationalisations. Robust steps to stamp it out are needed.

Today's tax avoidance goes far beyond loopholes and clever schemes. An elaborate, interlocking system for "legitimately" not paying tax allows vast amounts of money to trample over "official" tax and the economy.  

Tax revenues are being cored out. Britain is losing out on £60-85bn in company and personal taxes across the spectrum from "legitimate" avoidance, through "offshore" wealth, to outright evasion. Each £10bn lost is equivalent to the income taxes from two million average households.

Meanwhile taxes on company profits and returns from wealth (unearned income, capital gains etc) make disproportionately small contributions to the public purse. 

Avoidance gives larger, multi-national and "offshore" companies illegitimate market and competitive advantages. And gives overseas companies and offshore/avoidance "finance" all the cards in acquiring, running or asset stripping companies and markets. The effects feed down the entire tax, supply and value chains, distorting the economy and compounding the coring out of British jobs and businesses.  

And it's corrosive. Companies and people succeed for detrimental reasons, and everyone else comes under pressure to do the same. Those avoiding tax wrap themselves in the letter of the law and their "duty” to take advantage, even while, under threat of even more disappearing down the rabbit-hole, governments are pressured into reducing taxes even further. 

Endemic avoidance relies on means legitimated by the tax system:

  • Using companies, trusts and partnerships to shelter earnings or assets.
  • Overseas residency of people or companies, particularly in tax havens. 
  • Exploiting tax differences within the tax regime and between jurisdictions.
  • "Offshore" supply, production or ownership of companies or trade.
  • Transfer pricing; moving sales, costs or profits between subsidiaries or jurisdictions.

Criteria, rules and enforcement are then permissive. Nominal compliance requirements work hand-in-glove with opaque, fragmented financial reporting to subvert any rationale or constraints. And we permit, even encourage, a network of banks, tax havens, secrecy regimes, accountants and lawyers acting as the systems pro-active facilitators and cheerleaders. 

The Government's present “biggest ever crackdown” continues the tradition of curbing loopholes and avoidance only in the narrow "abuse" sense. Legitimated avoidance has been reaffirmed and extended (in parallel to cutting official corporation tax for large companies by a third). Indeed, changes to taxing earnings from overseas subsidiaries are an open license.

But international consensus that action is urgently needed is growing. In July all G20 countries, including Britain, endorsed the OECD's preliminary plan for tackling avoidance. This identified key problems but needs translating into concrete policies and action on the ground by national governments.

Curtailing British avoidance needs to simultaneously cut away its legitimating means, limit its advantages, make it harder to disguise and significantly strengthen enforcement. Specifically:

  1. Limit or remove the legal standing of – blacklist – companies or ownership from jurisdictions with cannibalistic tax and secrecy regimes (with "restricted" and "banned" categories).
  2. Restrict qualifying criteria for offshore and residency statuses.  Overseas ("offshore") ownership should be substantive not nominal; "non-domicile" status limited and finite in time; and "non-resident" status exclude those with lives, businesses or wealth in essence in or derived from the UK.  
  3. Curtail the benefits and permissiveness of offshore, ownership and residency statuses.  Non-domicile, non-resident, trusts and partnership advantages all need cutting back. Similarly, reverse the preferential treatment of "overseas" profits and firewall between remitted and non-remitted earnings.   
  4. Increase the costs and disadvantages of ownership or residency statuses. Tax charges can be increased, in particular made more progressive. Possibly (re)introduce an exit tax for British companies or citizens taking overseas residency, relocating or emigrating. 
  5. Require companies (and appropriate individuals) to provide transparent country-by-country accounts. Furthermore, the accounting and tax presumption for the assessment and validity of inter-group or cross-border charges would be strict apportionment of national sales and actual costs.
  6. If it exists, happens or is owned here, it's taxed here and taxed the same. For instance, tax UK on-line/remote sales where the sale is made; rather than as at present often "supplied" from "overseas" to avoid VAT and/or "booked" in another country to avoid company taxes.   
  7. Inhibit cross-jurisdiction costs, charges and tax exemptions that can be deducted for tax purposes, particularly between associated companies. These must be necessary, substantive and proportionate; with specific limitations on inter-group costs, debt, intellectual property and goodwill charges.
  8. Automatic information exchanges with other countries; not just existing by-request arrangements (where the number of UK requests is miniscule). Joining the existing European network is a good start.  
  9. Confront avoidance facilitators and promoters. Bar banks licensed or operating in Britain from operating in or providing facilities to British citizens or companies from "restricted jurisdictions". Require UK financial companies to automatically disclose all offshore accounts and holdings. And make advisory firms directly liable for tax penalties from avoidance they have promoted or facilitated. 
  10. Vigorous, properly empowered enforcement. Enact robust general anti-avoidance provisions. Significantly enhance HMRC's assessment powers, resources and personnel. And increase tax avoidance penalties, with both principals and intermediaries liable.  
  11. Major tax reform. Avoidance inducing disparities of tax treatment join improving economic performance, major fiscal problems and greater fairness in making reform long overdue. Today's complexity of taxes and rates needs replacing with consistent, equal treatment of all types of earnings – employment, unearned incomes, company profits and capital gains – while rebalancing between over-taxing of work and under-taxing big companies, wealth and "finance".
  12. Change the permissive and fatalistic culture. Given the corrosive damage being done, leaders and government can and should be taking vigorous action. Not paying proper taxes and mediating avoidance should cause explicit censure and sanctions. This includes recognising the City's complicity in wholesale tax avoidance from other countries as well as Britain.

But needed most is the political will and determination to take on the powerful vested interests that influence and lobby remorselessly to protect and extend today"s pernicious system. 

Photograph: Getty Images

One time Barrister, economist and media and technology entrepreneur, Chris Nicholas now writes and lectures on economic policy and political economy.

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This Ada Lovelace Day, let’s celebrate women in tech while confronting its sexist culture

In an industry where men hold most of the jobs and write most of the code, celebrating women's contributions on one day a year isn't enough. 

Ada Lovelace wrote the world’s first computer program. In the 1840s Charles Babbage, now known as the “father of the computer”, designed (though never built) the “Analytical Engine”, a machine which could accurately and reproducibly calculate the answers to maths problems. While translating an article by an Italian mathematician about the machine, Lovelace included a written algorithm for which would allow the engine to calculate a sequence of Bernoulli numbers.

Around 170 years later, Whitney Wolfe, one of the founders of dating app Tinder, was allegedly forced to resign from the company. According to a lawsuit she later filed against the app and its parent company, she had her co-founder title removed because, the male founders argued, it would look “slutty”, and because “Facebook and Snapchat don’t have girl founders. It just makes it look like Tinder was some accident". (They settled out of court.)

Today, 13 October, is Ada Lovelace day – an international celebration of inspirational women in science, technology, engineering and mathematics (STEM). It’s lucky we have this day of remembrance, because, as Wolfe’s story demonstrates, we also spend a lot of time forgetting and sidelining women in tech. In the wash of pale male founders of the tech giants that rule the industry,we don't often think about the women that shaped its foundations: Judith Estrin, one of the designers of TCP/IP, for example, or Radia Perlman, inventor of the spanning-tree protocol. Both inventions sound complicated, and they are – they’re some of the vital building blocks that allow the internet to function. 

And yet David Streitfield, a Pulitzer-prize winning journalist, someow felt it accurate to write in 2012: “Men invented the internet. And not just any men. Men with pocket protectors. Men who idolised Mr Spock and cried when Steve Jobs died.”

Perhaps we forget about tech's founding women because the needle has swung so far into the other direction. A huge proportion – perhaps even 90 per cent - of the world’s code is written by men. At Google, women fill 17 per cent of technical roles. At Facebook, 15 per cent. Over 90 per cent of the code respositories on Github, an online service used throughout the industry, are owned by men. Yet it's also hard to believe that this erasure of women's role in tech is completely accidental. As Elissa Shevinsky writes in the introduction to a collection of essays on gender in tech, Lean Out: “This myth of the nerdy male founder has been perpetuated by men who found this story favourable."

Does it matter? It’s hard to believe that it doesn’t. Our society is increasingly defined and delineated by code and the things it builds. Small slip-ups, like the lack of a period tracker on the original Apple Watch, or fitness trackers too big for some women’s wrists, gesture to the fact that these technologies are built by male-dominated teams, for a male audience.

In Lean Out, one essay written by a Twitter-based “start-up dinosaur” (don’t ask) explains how dangerous it is to allow one small segment of society to built the future for the rest of us:

If you let someone else build tomorrow, tomorrow will belong to someone else. They will build a better tomorrow for everyone like them… For tomorrow to be for everyone, everyone needs to be the one [sic] that build it.

So where did all the women go? How did we get from a rash of female inventors to a situation where the major female presence at an Apple iPhone launch is a model’s face projected onto a screen and photoshopped into a smile by a male demonstrator? 

Photo: Apple.

The toxic culture of many tech workplaces could be a cause or an effect of the lack of women in the industry, but it certainly can’t make make it easy to stay. Behaviours range from the ignorant - Martha Lane-Fox, founder of, often asked “what happens if you get pregnant?” at investors' meetings - to the much more sinister. An essay in Lean Out by Katy Levinson details her experiences of sexual harassment while working in tech: 

I have had interviewers attempt to solicit sexual favors from me mid-interview and discuss in significant detail precisely what they would like to do. All of these things have happened either in Silicon Valley working in tech, in an educational institution to get me there, or in a technical internship.

Others featured in the book joined in with the low-level sexism and racism  of their male colleagues in order to "fit in" and deflect negative attention. Erica Joy writes that while working in IT at the University of Alaska as the only woman (and only black person) on her team, she laughed at colleagues' "terribly racist and sexist jokes" and "co-opted their negative attitudes”. 

The casual culture and allegedly meritocratic hierarchies of tech companies may actually be encouraging this discriminatory atmosphere. HR and the strict reporting procedures of large corporates at least give those suffering from discrimination a place to go. A casual office environment can discourage reporting or calling out prejudiced humour or remarks. Brook Shelley, a woman who transitioned while working in tech, notes: "No one wants to be the office mother". So instead, you join in and hope for the best. 

And, of course, there's no reason why people working in tech would have fewer issues with discrimination than those in other industries. A childhood spent as a "nerd" can also spawn its own brand of misogyny - Katherine Cross writes in Lean Out that “to many of these men [working in these fields] is all too easy to subconciously confound women who say ‘this is sexist’ with the young girls who said… ‘You’re gross and a creep and I’ll never date you'". During GamerGate, Anita Sarkeesian was often called a "prom queen" by trolls. 

When I spoke to Alexa Clay, entrepreneur and co-author of the Misfit Economy, she confirmed that there's a strange, low-lurking sexism in the start-up economy: “They have all very open and free, but underneath it there's still something really patriarchal.” Start-ups, after all, are a culture which celebrates risk-taking, something which women are societally discouraged from doing. As Clay says, 

“Men are allowed to fail in tech. You have these young guys who these old guys adopt and mentor. If his app doesn’t work, the mentor just shrugs it off. I would not be able ot get away with that, and I think women and minorities aren't allowed to take the same amount of risks, particularly in these communities. If you fail, no one's saying that's fine.

The conclusion of Lean Out, and of women in tech I have spoken to, isn’t that more women, over time, will enter these industries and seamlessly integrate – it’s that tech culture needs to change, or its lack of diversity will become even more severe. Shevinsky writes:

The reason why we don't have more women in tech is not because of a lack of STEM education. It's because too many high profile and influential individuals and subcultures within the tech industry have ignored or outright mistreated women applicants and employees. To be succinct—the problem isn't women, it's tech culture.

Software engineer Kate Heddleston has a wonderful and chilling metaphor about the way we treat women in STEM. Women are, she writes, the “canary in the coal mine”. If one dies, surely you should take that as a sign that the mine is uninhabitable – that there’s something toxic in the air. “Instead, the industry is looking at the canary, wondering why it can’t breathe, saying ‘Lean in, canary, lean in!’. When one canary dies they get a new one because getting more canaries is how you fix the lack of canaries, right? Except the problem is that there isn't enough oxygen in the coal mine, not that there are too few canaries.” We need more women in STEM, and, I’d argue, in tech in particular, but we need to make sure the air is breatheable first. 

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.