Osborne takes the first step on tax avoidance. Now for the rest…

The chancellor's GAAR should help ensure tax justice. But it's only a start, writes Salman Shaheen

George Osborne’s article in the Observer following the G20 meeting of Finance Ministers in Moscow at the weekend provides the first sign that Britain is finally ready to tackle tax avoidance and help reform an international tax system that is almost a century out of date. But the Chancellor will have to go much further than these warm words alone if he is serious about clawing back the money multinationals are avoiding paying in the UK, and helping developing economies move from aid to a more sustainable form of growth.

Osborne is bang on the tax-free money when he identifies the problem as a systemic one. The international tax system was designed, after all, for the nation state in the days before globalisation. But tax avoidance occupies a space between laws. It is not so much that it is legal, as companies practising these aggressive schemes claim in their defence, but that the laws as they exist are inadequate to cover it.

The result is the press is left picking over the PR disasters of Google, Amazon, Starbucks and most recently Associated British Foods, while a cash-strapped Britain finds itself with a tax gap of £123bn according to Richard Murphy of Tax Research. In an era of austerity, public mistrust of corporates and government and increased risk for companies increasingly coming under challenge for structures they’ve employed for decades, no one wins from a system that promotes uncertainty and an unlevel playing field.

On this, the Chancellor is absolutely right. The trouble is the actions he has lined up to back these necessary words will make little more than a dent in the tax avoidance industry. If the problem is systemic, as he identifies, then it can’t be solved by tinkering around the edges, only wholesale reform.

For one, he trumpets the General Anti-Abuse Rule (GAAR) he is introducing, essentially a net allowing HMRC to challenge artificial and abusive tax avoidance schemes which, because they are often complex or novel, could not have been contemplated directly when formulating the tax legislation.

But as Michael Meacher – who is pushing for a much stronger version of the GAAR in Parliament – told me, the government’s proposal will only catch the most egregious schemes, letting the rest slip through:

The real purpose of the GAAR is not to counter tax avoidance, but to narrow its definition, making everything else ethically and technically acceptable because it is outside that narrow remit.

Secondly, Osborne points to Britain’s push in the EU and in the Extractive Industries Transparency Initiative for limited forms of country-by-country reporting to provide greater transparency in the oil, gas and mining sectors.

This is a vital first step. But if Osborne is serious about tax transparency, he must now make the case for a much more robust form of country-by-country reporting whereby every large multinational corporation in every sector would be required to publish in their annual audited financial statements a country consolidated profit and loss account, limited balance sheet and cash flow data on tax paid for every jurisdiction where they have a permanent establishment for tax.

Finally, Osborne backs an OECD report to the G20 on base erosion and profit shifting. This is to be welcomed and much will depend on the outcome of the action plan that is put to the G8 in July.

But Osborne must recognise that merely tinkering with the transfer pricing system, whose weaknesses have left the UK and developing countries alike open to multinational corporations shifting their profits into tax havens, is not enough. Osborne should be pushing for serious examination of a system of unitary taxation, under which companies would submit a global consolidated account in each country in which they are present, then apportion the global profits among these countries by a formula reflecting the genuine economic activity of the company in each jurisdiction.

Only through these measures can the problem of tax avoidance be seriously tackled. Osborne’s words are warm and welcome, but they are just the first step. Now the world will be watching as Britain prepares to host the G8. The Chancellor’s task is not to falter or miss this historic opportunity.

Wiping the first step. Photograph: Getty Images

Salman Shaheen is editor-in-chief of The World Weekly, principal speaker of Left Unity and a freelance journalist.

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"We repealed, then forgot": the long shadow of Section 28 homophobia

Why are deeply conservative views about the "promotion" of homosexuality still being reiterated to Scottish school pupils? 

Grim stories of LGBTI children being bullied in school are all too common. But one which emerged over the weekend garnered particular attention - because of the echoes of the infamous Section 28, nearly two decades after it was scrapped.

A 16-year-old pupil of a West Lothian school, who does not wish to be named, told Pink News that staff asked him to remove his small rainbow pride badge because, though they had "no problem" with his sexuality, it was not appropriate to "promote it" in school. It's a blast from the past - the rules against "promoting" homosexuality were repealed in 2000 in Scotland, but the long legacy of Section 28 seems hard to shake off. 

The local authority responsible said in a statement that non-school related badges are not permitted on uniforms, and says it is "committed to equal rights for LGBT people". 

The small badge depicted a rainbow-striped heart, which the pupil said he had brought back from the Edinburgh Pride march the previous weekend. He reportedly "no longer feels comfortable going to school", and said homophobia from staff members felt "much more scar[y] than when I encountered the same from other pupils". 

At a time when four Scottish party leaders are gay, and the new Westminster parliament included a record number of LGBTQ MPs, the political world is making progress in promoting equality. But education, it seems, has not kept up. According to research from LGBT rights campaigners Stonewall, 40 per cent of LGBT pupils across the UK reported being taught nothing about LGBT issues at school. Among trans students, 44 per cent said school staff didn’t know what "trans" even means.

The need for teacher training and curriculum reform is at the top of campaigners' agendas. "We're disappointed but not surprised by this example," says Jordan Daly, the co-founder of Time for Inclusive Education [TIE]. His grassroots campaign focuses on making politicians and wider society aware of the reality LGBTI school students in Scotland face. "We're in schools on a monthly basis, so we know this is by no means an isolated incident." 

Studies have repeatedly shown a startling level of self-harm and mental illness reported by LGBTI school students. Trans students are particularly at risk. In 2015, Daly and colleagues began a tour of schools. Shocking stories included one in which a teacher singled out a trans pupils for ridicule in front of the class. More commonly, though, staff told them the same story: we just don't know what we're allowed to say about gay relationships. 

This is the point, according to Daly - retraining, or rather the lack of it. For some of those teachers trained during the 1980s and 1990s, when Section 28 prevented local authorities from "promoting homosexuality", confusion still reigns about what they can and cannot teach - or even mention in front of their pupils. 

The infamous clause was specific in its homophobia: the "acceptability of homosexuality as a pretended family relationship" could not be mentioned in schools. But it's been 17 years since the clause was repealed in Scotland - indeed, it was one of the very first acts of the new Scottish Parliament (the rest of the UK followed suit three years later). Why are we still hearing this archaic language? 

"We repealed, we clapped and cheered, and then we just forgot," Daly says. After the bitter campaign in Scotland, in which an alliance of churches led by millionaire businessman Brian Souter poured money into "Keeping the Clause", the government was pleased with its victory, which seemed to establish Holyrood as a progressive political space early on in the life of the parliament. But without updating the curriculum or retraining teaching staff, Daly argues, it left a "massive vacuum" of uncertainty. 

The Stonewall research suggests a similar confusion is likely across the UK. Daly doesn't believe the situation in Scotland is notably worse than in England, and disputes the oft-cited allegation that the issue is somehow worse in Scotland's denominational schools. Homophobia may be "wrapped up in the language of religious belief" in certain schools, he says, but it's "just as much of a problem elsewhere. The TIE campaign doesn't have different strategies for different schools." 

After initial disappointments - their thousands-strong petition to change the curriculum was thrown out by parliament in 2016 - the campaign has won the support of leaders such as Nicola Sturgeon and Kezia Dugdale, and recently, the backing of a majority of MSPs. The Scottish government has set up a working group, and promised a national strategy. 

But for Daly, who himself struggled at a young age with his sexuality and society's failure to accept it, the matter remains an urgent one.  At just 21, he can reel off countless painful stories of young LGBTI students - some of which end in tragedy. One of the saddest elements of the story from St Kentigern's is that the pupil claimed his school was the safest place he had to express his identity, because he was not out at home. Perhaps for a gay pupil in ten years time, that will be a guarantee. 

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