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Britain is finally ready to tackle tax avoidance and help reform an international tax system that is almost a century out of date.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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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.