Joy of Tax

Westen Morning News

Published Sunday 11th January 2015

As an economist, I am used to people stifling yawns when I talk about my legislative work on taxation in the European Parliament. But, undeterred, I am going to try and convince you that the issue of taxation is not only fascinating but fundamental to many of the seemingly intractable problems that we face as a society.

Avoiding taxes should be regarded as anti-social behaviour, in the same way vandalism and drink-driving are. It is selfish behaviour that some of the best known brands, such as Starbucks, Amazon and Disney, are well versed in.

The extent of tax avoidance in Europe has come to light recently in the ‘Luxleaks’ scandal, exposing the role Luxembourg authorities played in ‘facilitating’ massive tax avoidance by multinational corporations. This deprives countries of vast revenues, which only goes to exacerbate and reinforce the politics of austerity. LuxLeaks is all the more controversial as it happened while Jean-Claude Juncker, now President of the European Commission, was Prime Minister of Luxembourg.

Changing laws on corporation tax may not seem to have much to do with life in the South West. But if Starbucks and Amazon pay next to nothing in taxation, compared to the independent book shops and family-run cafes that do pay up, it is not surprising that independents cannot compete and go out of business. So accounting tricks in the Cayman Islands or Luxembourg are killing our high streets and smashing up our local communities.

Politically, we hear plenty of warm words from mainstream politicians about cracking down on tax avoidance but little action has followed. The proposal by Greens in the European Parliament for a powerful Inquiry into LuxLeaks and tax avoidance, for example, has been blocked by centre-right and centre-left groups. Osborne announced welcome but limited steps on tax avoidance in the autumn statement; Labour has pledged to stand up to powerful vested interests and impose penalties on companies avoiding tax. Yet all 20 Labour and 27 Conservative MEPs have so far refused to match their rhetoric on cracking down on tax evasion with action; they have failed to support the call by Greens for a robust European Parliamentary interrogation of secret tax deals and tax competition between member states.

Tax is of course a complex area but the steps we need to take are fairly simple. First, we need companies to be required to report their turnover according to where the economic activity takes place. Governments would then receive tax from companies that use their country’s services and receive the revenue they need to maintain those services.

Secondly, we need to end the secrecy of legal forms such as the trust, which are used to hide ownership and the tax duties of ownership. A transparent register identifying who gains through property ownership and thus should pay the tax due is an important step to making sure that tax is paid by the big people as well as the little people.

Finally, the government must treat white-collar crime as seriously as other crime by enforcing its own General Anti Abuse Rule. To do this it is essential there are as many government employees investigating tax avoidance as there are accountants employed by the Big Four accounting firms helping corporations avoid paying their fair share.

Tax may not sound sexy, but it is the price we pay for being part of a civilised society. As an MEP with special responsibility for taxation, I see it as part of my job to make people feel a bit more comfortable about paying their taxes. I also want to ensure that tax dodgers, and the army of corporate accountants supporting their antisocial behaviour, feel considerably less comfortable.