Space havens

News has leaked that as a consequence of Germany’s plans to block tax haven abuse a consortium of international firms is, quite literally, launching an alternative. It’s the space haven.

The consortium, known apparently by the name KPWDY, is planning to set up a tax haven on a satellite orbiting the earth. As they are reported to have said:

This creates opportunities for tax planning that are out of this world.

And, they stress, it’s wholly legal as well, and they think entirely beyond challenge.

Apparently the standard tax haven structure of a trust owning a company which in turn will operate a bank account that will settle the debit card bills run up by the settlor of the whole arrangement will all be available from the satellite facility - and not a single human will have to play a single part in supplying the service.

All the facilities that one would usually expect of a tax haven administrator will be undertaken automatically by the computers on board the satellite. These will always act in accordance with the instructions given to them by the trust settlor who will, as is now common place on earth, have full reservation of powers with regard to the whole structure being that human interference of a real trustee is quite unnecessary since they have no role in the arrangement other than loan of their name. In that case the space satellite option will use incorporated nominees, all of whom will have signed complete non-disclosure agreements requiring that they never make enquiry as to the identity of the entities for whom they act. It’s considered invincible.

To add to the appeal of the arrangement it is thought that a complete bank will also be hosted on the satellite with all transactions being run, again, by the settlor.

The only question apparently left to resolve is whether companies and trusts set up in space will be able to transact here on earth. But it’s not likely to be an issue of much concern to all involved, not so long as the debit card bills continue to be paid and a margin is earned all round. If that’s done then it’s reported that stellar profits are expected.

PWC’s statistics

All blog owners like to look at their visitor statistics every now and again. the one who denies this is a liar.

I noticed something curious when I did so recently. It seems that the four most popular articles on this blog are (in order):

Yet more misinformation from PWC

PWC’s Total Tax Oversight

PWC’s Total Tax - the fundamental accounting flaw

Biased misinformation - The PWC Total Tax Contribution 2007

What does that say?

My del.icio.us bookmarks for March 28th

These are my links for March 28th:

Offshore Financial Centers: Myth And Reality - Forbes.com - This lot is a work of fiction

FT.com / In depth - Four-year low for M & A - Excellent news for real business. These things have not been proven to add value to anyone bar the advisers

Seumas Milne: Religion is now a potential ally of radical social change Comment is free The Guardian - I am convinced this is true

Nicholas Bate: Five Potential Productivity Fallacies - Off topic, but good. Hat tip to Dennis Howlett

It’s good to have friends

I’m sometimes amazed at some of the accusations that have been levelled against me for for simply asking that people pay the right amount of tax, at the right time in the right place. The accusation by Nichola Ross Martin of AccountingWEB that I was an extremist was one of the more absurd, and does perhaps say a great deal about the current state of the accountancy profession, and how out of touch with its social responsibility it is.

It’s therefore cheering on occasion to find some people believe in what I and those I work with are doing. This is an encouraging example:

Early Day Motion
EDM 1251

TUC REPORT ON THE UK TAX GAP
20.03.2008

Hopkins, Kelvin

That this House welcomes the TUC Report, The Missing Billions - The UK Tax Gap; congratulates its author Richard Murphy, Director of Tax Research LLP, on a brilliant analysis of how tax losses to the Treasury and thus to the public purse amount to £33 billion each year; notes that this figure comprises £13 billion from tax avoidance by individuals, £12 billion from tax avoidance by the 700 largest corporations and £8 billion from tax planning by individuals earning more than £100,000 per annum; believes that this vast lost revenue should be collected in future years and used, among other things, to raise the state pension, increase child benefit and pay for free long-term care; and strongly supports the report’s conclusion that action can be taken to address the problem and that what is required to achieve this is the necessary political will.

Cayman’s top police suspended - and London sends an anti corruption team to investigate

Cayman NetNews has reported that:

The Governor of the Cayman Islands, His Excellency Stuart Jack, CVO, today (Thursday, 27 March) announced that he has put three senior police officers on required leave to facilitate enquiries into allegations against officers of the Royal Cayman Islands Police Service (RCIPS).

Police Commissioner Stuart Kernohan, Deputy Commissioner Rudolph Dixon and Detective Chief Superintendent John Jones were put on required leave with immediate effect to enable an investigating team from the Metropolitan Police Service led by DCS Martin Bridger to proceed with their enquiries.

As Cayman NetNews rightly says, there must be a presumption of innocence at this stage. It’s interesting to note the follwoing though:

In a separate statement, Senior Investigating Officer Martin Bridger said that much of his 30 year career as a detective has been spent dealing with issues of integrity within the police services. This included working in the Anti-Corruption Unit of London’s Metropolitan Police Service, Northern Ireland’s Police Ombudsman Office and advising other UK and European police services on how to meet the challenges offered by breaches of integrity and wrongdoing.

I think the nature of the allegations are clear.

My del.icio.us bookmarks for March 27th

These are my links for March 27th:

FT.com / In depth - Report links KPMG to fraud at New Century - Another hole for KPMG to dig themselves out of

My del.icio.us bookmarks for March 26th

These are my links for March 26th:

FT.com / Columnists / John Kay - More regulation will not prevent next crisis - Amazing - the banker’s apologists are still arguing that there’s no place for regulation in the face of their abuse

FT.com Willem Buiter�s Maverecon Moral hazard, here we come! - Bera Stearn bail out just replicates all the problems that gave rise to it

3i turns its back on investment in start-ups Business The Guardian - Looks like we’re back to the days when venture capital was called Slater Walker.

Accountants urge non-doms to splash out - Accountancy Age - It’s very hard to credit that people are this stupid. But apparently they are.

Fund group moves base from UK to Dublin - Accountancy Age - I trained with Gareth Pearce, Chairman of Smith & Williamson. I recall him being a bit of a lefty in those days. Times change. People change. Not always for the better.

Fears over stamp duty crackdown - Accountancy Age - What’s the fear? Only that people might have to pay the tax that the law asks of them. What is so frightening about that?

More signals that the days of deregulation are over

Der Spiegel has reported that:

The head of Germany’s leading Deutsche Bank, Josef Ackermann, said the world financial crisis currently unfolding would need strong and organized government intervention to stop further bleeding in financial institutions. Simple market corrections, he said, won’t do the trick. “I no longer believe in the market’s self-healing power,” he told an audience in Frankfurt on Monday. “Making liquidity available isn’t the cure-all.”

Coming on the same day as Martin Wolf has said the same thing I believe it’s safe to say that the neo-liberal model is dead.

But there are those who persist with the other view. This is John Kay in the FT today:

The notion that future banking crises can be averted by better regulation demonstrates unrealistic expectations of what regulation might achieve. ..

Perhaps there was once a golden age when the authority and wisdom of central bankers were so great that such regulation was possible and effective, although the recurrence of bank crises suggests otherwise. Today the financial services industry is the most powerful political lobby in the country and public trust in and respect for regulation are low. All regulators feel buffeted by threats of legal action; there is no easier way to win applause from business audiences than by denouncing red tape.

But in financial services, the demand today is for more regulation. That call should be resisted. The state cannot ensure the stability of the financial system and a serious attempt to do so would involve intervention on an unacceptable scale. But to acknowledge responsibility for financial stability is to assume a costly liability for failure to achieve it. That is what has happened.

The dinosaurs aren’t going to die without a struggle it seems, but the argument Kay presents is absurd. What’s he’s saying is that finance must be allowed to do what it will and the state should pick up the pieces when it goes wrong. That, of course, is exactly why it must be either regulated, and reformed until that can be done. It’s the latter that Kay ignores as a possibility, and he’s wrong to do so. No one is going to give banks licence to carry on in the future as they have to date.

Deregulation has ended: now we begin to rein back in

Martin Wolf said this in the FT today:

Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over. It showed in deeds its agreement with the remark by Joseph Ackermann, chief executive of Deutsche Bank, that “I no longer believe in the market’s self-healing power”. Deregulation has reached its limits.

He’s right. Now we’re reining in. And offshore secrecy has to be very high on the list of abuses that has to stop. That’s for the same reasons that Wolf argues this:

The lobbies of Wall Street will, it is true, resist onerous regulation of capital requirements or liquidity, after this crisis is over. They may succeed. But, intellectually, their position is now untenable. Systemically important institutions must pay for any official protection they receive. Their ability to enjoy the upside on the risks they run, while shifting parts of the downside on to society at large, must be restricted. This is not just a matter of simple justice (although it is that, too). It is also a matter of efficiency. An unregulated, but subsidised, casino will not allocate resources well. Moreover, that subsidisation does not now apply only to shareholders, but to all creditors. Its effect is to make the costs of funds unreasonably cheap. These grossly misaligned incentives must be tackled.

The world is not the same. Some of us are pleased.

CIOT supports small business tax reform

The Chartered Institute of Tax issued the following press release today:

The Chartered Institute of Taxation (CIOT) welcomes the second Early Day Motion (EDM) on income shifting that has been tabled in the House of Commons. When the first EDM was tabled the CIOT said that it had long been of the view that fundamental reform to the structure of small business taxation was necessary if small businesses were to be able to plan their tax affairs with any degree of certainty.

The second EDM says: “That this House… calls on HM Treasury and other affected departments to use the additional year that they have allowed themselves for consultation on this issue to undertake a thorough review of more appropriate means of providing smaller enterprises with a suitable legal entity designed for use in the 21st century, and not the 19th century as the limited company was, that will simultaneously reduce the taxation, accounting and regulatory burdens on smaller enterprises, so freeing them to generate wealth and employment in the UK economy, whilst ensuring that they can with minimum effort comply with the taxation and other requirements imposed upon them by law in a way that minimises risk of tax avoidance, creates a level playing field in which all in the sector can compete fairly and ensures that the right person is taxed on the reward they have earned at the right time and in ways which do not create artificial and inappropriate incentives to recategorise employment as self-employment, and the reward for labour effort expended as investment income.”

Rob Ellerby, CIOT President, says: “The MPs who tabled this motion are right to say that by extending the process for another year, the Government has given itself a great opportunity to think through the issue more fundamentally with a view to coming to a better answer.”

The EDM, tabled by David Drew MP, is based upon Tax Research’s submission on this issue to HM Revenue & Customs. I welcome CIOT’s endorsement of this approach.

Wisconsin leading the way

It’s not something I think I’ve said before, but Wisconsin is leading the way on tax reform right now. According to the Milwaukee Journal Sentinel (not one of my regular reads):

Democratic state senators today said large, multi-state corporations pay little or no corporate income taxes in Wisconsin, so they adopted a budget-repair bill that would end what they call tax-code “loopholes.”

The budget-balancing bill the Democrats pushed through the Senate, on a 18-14 vote, would tax the profits of parent companies, instead of the current system of taxing the profits of their subsidiaries. The change, called “combined reporting,” would cost businesses $130.5 million by mid-2009, according to the Legislative Fiscal Bureau.

Senate Democrats said giant companies like McDonald’s, Wal-Mart, Microsoft and General Electric are big enough to set up subsidiaries that allow them to pay little or no corporate income taxes in Wisconsin. Small and medium-sized Wisconsin companies can’t afford those tax-avoidance deals, so they have no choice but to pay the 7.9% corporate tax, said Democratic Sen. John Lehman of Racine.

Senate Majority Leader Russ Decker (D-Weston) said Wal-Mart made more than $850 million on its Wisconsin businesses from 2000 to 2003, but paid only $3 million in corporate taxes.

“It’s time to pick a side:Wisconsin families and businesses, or Wal-Mart,” Decker said.

Decker asked the right question and gave the right answer. Unitary taxation, here we come. It’s the way to reclaim the local from the global abuse of those assaulting society.

My del.icio.us bookmarks for March 25th

These are my links for March 25th:

Brown’s £20bn business boost plan flawed says NAO - Accountancy Age - That’s because admin is not causing the burden that it’s blamed for by those who can’t make money

What are the wealthy to do?

According to Wealth Briefing:

A shortage of top-class client relationship managers in the world’s wealth management industry threatens to undermine its efforts to keep up with demand, according to a survey by PriceWaterhouseCoopers, the accountants and consultants.

No wonder Gordon Brown wants to teach entrepreneurship in the UK’s primary schools.

The ACCA should be ashamed to be associated with these comments

The Christian Science Monitor is not my usual read, but I am also well aware that it is noted for good quality reporting. That’s the case in a report published today on the widening probe into tax haven abuse in Europe, which I would recommend to anyone looking for a good summary of the situation.

What really drew the report to my attention though were the comments of Chas Roy-Chowdhury, head of taxation at Britain’s Association of Chartered Certified Accountants, who is reported as saying:

What needs to be made clear is that there is nothing illegal about holding bank accounts in Liechtenstein and wanting secrecy as long as you pay the right amount of tax in your own jurisdiction.

That is, of course technically true. But to offer such a comment is also a way of denying the fact that this is not the way these things almost invariably work. The secrecy is designed to make sure that those with these account do not have to declare them because no-one knows about them. That’s why people place funds in places like Liechtenstein, and not because it offers any real financial advantage. I do not believe Chas Roy-Chowdhury does not know that and as such I think his comment is deliberate obfuscation.

I might have lived with that though if he had not gone on to make further comment:

He says part of the objection is that smaller jurisdictions can afford attractive, low tax rates that result in “capital flight” from bigger countries. “Governments should open themselves up to the wind of global competition and accept that they need to run efficiently to keep tax rates low.”

I am, to be candid, shocked that the ACCA let’s him say such things, for these reasons:

a) This is blatantly political propaganda of a type which no professional body should promote if it is to retain that status;

b) Capital flight, as he should know, is usually illegal and has massive cost on society, especially in the developing countries of the world where the ACCA seeks to recruit much of its membership. By commenting as he does he either endorses the economic instability that tax havens create in the developing world in particular or he shows that he does not understand what capital flight is. Either way the ACCA should be worried that such a man is making comment on their behalf.

c) He should know, but clearly does not, that the ‘low tax rates’ to which he refers cannot be afforded by the smaller jurisdictions to which he refers. For example, a Liechtenstein foundation might be tax free for a non-resident person but is most certainly not for a Liechtenstein resident person. As such he should know that the model he is promoting is not sustainable, or transferable to large jurisdictions unless he is promoting the abolition of taxes on all companies and investment income. If he is then the ACCA has moved onto very dangerous political ground and must justify why it has done so.

d) By discussing tax competition in this way he should realise that he is promoting an assault on democracy itself. It is through the ballot box that tax rates should be set, not through the actions of parasitical principalities. That is the point others in the article make, that the debate is not on tax rates but on secrecy, a point that seems to have escaped him in his desire to promote his political agenda.

e) By diverting attention to this political agenda he seeks to divert attention from the fact that this whole issue is actually a debate about crime, and so long as there is tax there will be tax evasion if there is secrecy that allows it to persist undetected or undetectable. He should have resoundingly condemned tax evasion but did instead seek to apologise for it.

All this says to me that the ACCA has moved far from the mainstream, which might best be represented by this FT editorial comment which Chas Roy-Chowdhury appears to have been unable to endorse:

Helping evasion is distinct from legitimate tax competition. Monaco or Bermuda or Switzerland are fully entitled to set low rates of personal and business tax to attract wealthy individuals and companies to their jurisdiction. What is not acceptable is helping those who live elsewhere to evade the taxes that they owe.

It’s another sad day for the profession.

Disclosure: I am a member of the ACCA’s research committee, in which context I meet Chas Roy-Chowdhury. I am not a member of the ACCA.

Provident Financial: blatantly exploitative

I noted this advert in the Christian Science Monitor today, aimed at the UK market:

I’ve long hated all Provident Financial stands for in terms of exploitation of the poorest in our community. And here they are, continuing to do so, profiting from the credit squeeze and abusing those must vulnerable to its impact.

It’s a sickening indictment of our financial services industry that this company survives, and a failure of a Labour government that has let it do so when options for change have been presented to it, by me amongst others.

My del.icio.us bookmarks for March 24th

These are my links for March 24th:

FT.com / World - UK colleges snub short business degrees - Quite right too. These aren’t degrees. This is not the purpose of an education.

Completely untrue

A partner with Baker & McKenzie Switzerland, who are, I believe, the biggest firm of lawyers in the world has sought to attack Germany’s attempt to break banking secrecy, according to Dow Jones online financial news who say:

Philip Marcovici, a partner in the Zurich office of law firm Baker & McKenzie, said: “This is not an issue involving just Germany and the other offshore centres in Europe. It is a global trend towards greater transparency in the tax affairs of the rich.

“This involves offshore centres across the world such as Singapore, Hong Kong and even Latin American money residing in offshore accounts in the US.”

Marcovici said all parties involved in the dispute should come together to negotiate the issues. “Germany needs to realise that part of the culture of secrecy in offshore centres like Switzerland is to do with historical factors like the second world war that it was responsible for.

“Equally, the banks need to realise that the days of banking secrecy are numbered as globalisation increases the need for transparency.”

Marcovici should get his facts right. The banking secrecy laws in Switzerland pre-date the Nazis and have nothing to do with their influence. That’s just seeking to find excuses for delaying what he recognises is inevitable. He should instead be seeking to reduce the number of days that we have to banking secrecy. That way he might win some credibility. Speaking as he did he wins none.

Tax havens in Florida

A reminder, for those who want to learn more about tax havens, of the following:

6th OffshoreAlert
Financial Due Diligence Conference
‘The Unexpurgated Offshore’
Sunday - Tuesday, April 13 - 15, 2008, Fort Lauderdale, Florida USA

I’ll be there but from a look at the speaker list am expecting to be a little outnumbered by those with whom I share little common ground.

Hedge fund desparation

The FT has noted that:

Carrington Capital Management, a $1bn hedge fund specialising in mortgages, is trying to persuade its investors to lend it up to $200m to replace bank loans, in the latest sign of concern about banks pulling credit lines to hedge funds.

Carrington, part-owned by New Century, the failed US subprime lender, has offered investors an 18 per cent interest rate on new preferred shares it plans to issue.

18%? Is anyone that mad?

The cost of hedge funds

The FT has reported that:

Commodities prices have been falling across the board as hedge funds cut their exposure to one of the most popular asset classes so far this year, suggesting that recent record prices have been buoyed by speculative flows.

Yet more evidence that the real world, real trade and real people are harmed by secretive, offshore hedge funds.

My del.icio.us bookmarks for March 23rd

These are my links for March 23rd:

Fall in tax payments sends warning to Darling - Times Online - In a downside the governmemt has to break the rules - so let’s stop pretending things are as they were in 2005

Leader: Timid Brown must catch up with reality Comment is free The Observer - Keeping fingers crossed for a soft landing is questionable policy; as ideology, it is bankrupt.

William Keegan: After excess comes fear - and then socialism, at least for the bankers Business The Observer - T The game is up. It is not the end of capitalism; but a particular form of financial capitalism is going outside and may be some time.

Simon Caulkin: Capitalism’s too important to be left to capitalists Business The Observer - If bad rules got us into this mess, better ones - which go with rather than against the grain of humanity, community and the physical realities of the planet - can get us out again.

Will Hutton: If the City won’t put its house in order, politicians must Comment is free The Observer - Today’s lack of political criticism cannot last much longer - there is too much popular and even business demand for change. For the party capable of breaking the deadlock, the payback will be huge.

Outside View: The end of capitalism as we know it? - Business Comment, Business - Independent.co.uk - Yes, is the answer

FT.com / Home UK / UK - Case for investment bonds for higher-rate taxpayers - Th article disguises the real issue - that the 5% withdrawals are not taxable - so are not deemed remittances by the non-doms seeking to have less than £2,000 of offshore income. Close the loophole, now!

Micheal Meacher speaking on Tax Justice in the Budget debate

Michael Meacher MP spoke on tax justice in the budget debate. It’s one of the fullest speeches on the subject in the House of Commons, so I reproduce it in full:

Mr. Meacher: There was one rather odd omission from the Budget. It contained next to nothing about dealing with tax avoidance. That is quite surprising given the difficult state of the public finances-to which the hon. Gentleman rightly drew attention-the Chancellor’s obvious need to close the gap, and the current international campaign led by Germany to tackle the scandal head-on, which I consider very important.

As we know, the hole in public revenues amounts to some £40 billion. That is a large amount, and it is increasing. The Treasury forecasts that the figure will be £7 billion higher than was suggested in the October pre-Budget report. The Chancellor had every incentive to claw back tax avoided and evaded to help balance the books without raising taxes for the rest of the population.

A recent pamphlet produced by the Trades Union Congress and written by the tax accountancy expert Richard Murphy found that tax avoidance and tax planning-by which I mean fabricating plans artificially in order to pay little or no tax, a device employed by very rich individuals-now account for about £13 billion a year, while the same device employed by companies in rather different ways accounts for a further £12 billion a year. There is obviously plenty of scope for much tougher anti-avoidance measures that would benefit everyone else. If such persons can be made to pay their due and proper taxes, others will need to pay less. Moreover, Inland Revenue statistics show that those who are paid more than £100,000 a year, who constitute less than 1 per cent. of the population, now receive £8 billion in tax reliefs and allowances.

Another important factor that could well have propelled the Chancellor towards a Budget assault on tax avoidance, which I think is long overdue, is that the international atmosphere is much more conducive to tougher action that it has been for decades. Germany, as we have read, believes that it is losing nearly £25 billion a year in tax evasion by rich Germans holding anonymous trusts in Monaco and Andorra, in addition to others who, rather curiously, were outed by a whistleblower as having secreted huge sums of money in another tax haven, namely Liechtenstein. Germany is now demanding cross-national action to force countries with banking secrecy to share information. That is a favourable climate for the UK to participate and take the lead.

Since there is considerable evidence that super-rich British people also use these and other tax havens-notably the Cayman Islands-for the same purpose, a crackdown on those avoiding their tax responsibilities could produce big benefits for the UK Treasury and, my goodness, there has never been a time when the UK Treasury needed big benefits as it does now.

Why was that not done in the Budget? I suspect the reason is the stranglehold exerted by the City on the Government-particularly on the Prime Minister, I have to say-who have been persuaded that the financial enclave of the City of London is central to the economic interests of the UK as a whole. I submit that of course it has an important role, which I would not downplay for a moment, but the idea that it is central to the UK economy is quite another proposition.

By bending over backwards to encourage hedge funds and private equity firms through the most egregious tax liberality-I refer to the absurdly low 18 per cent. basic tax rate on income from the carry, or share, of the gains on these massive deals, which is less than half the income tax rate payable by top earners-and as a result of other measures, the Government have in effect turned the UK, or more specifically the City of London, into a gigantic tax haven for the internationally mobile business élite. The problem is that, by sucking talent and capital from other parts of the economy, the remarkable successes over the past 10 years, which I am the first to praise, have been bought at a very high price-I would say too high a price.

As the credit crunch is now exposing, City profits on invisibles cannot and never could compensate for the steady, continuing decline of Britain as a manufacturing nation-and that is the basis of wealth for all industrial countries. The volatility and excesses of the finance sector are outweighed by the 1 million jobs lost in manufacturing over the past decade, the stagnant industrial output, the £7 billion-a-month trade deficit, and the weakness of manufacturing investment and of the so-called knowledge economy-R and D-which is confined to a very few sectors. Those also have to be taken into account. My point is not that the City of London does not have a key role, but that it cannot be allowed to exploit that role at the expense of reducing the capability of Britain as a sustainable industrial base.

Even when other countries have recently made what can only be regarded as a very serious effort to counteract some of these excesses in tax avoidance, the UK has taken a lead in blocking them. The UK has for example regularly refused to allow the deduction of tax from interest payments within the EU, which would hugely restrict the effectiveness of tax havens because the basic rate of tax-presumably about 20 per cent.-would already have been deducted from the income before it reached the tax haven. There can be little doubt that this withholding tax proposal of the EU was stymied in order to preserve the UK as a tax haven, given the City of London links to the overseas protectorates and Crown dependencies.

If I may I shall give just one more example of what I think is an industrial and financial way of life that is not sustainable. Maintaining fiscal independence from Europe may be a populist move-clearly it is in this country-but in reality it enables the international corporations to play the EU and other countries off against each other in constantly bargaining for lower tax rates.

The credit crunch and the approaching downturn, which some people, even today, believe may have very serious consequences, show that a different approach is now necessary. Not only is closer regulation of the financial markets clearly now imperative to prevent future damage to the international economy-the precipitate collapse of Bear Stearns is clearly not the last of it-but the UK in particular can no longer afford either the prohibitive cost of the tax privileges of the City or, just as importantly, the collateral manufacturing damage inflicted on Britain as an industrial nation. [ Interruption. ] Before the hon. Member for Runnymede and Weybridge (Mr. Hammond) gets carried away, let me remind him that Winston Churchill, as Chancellor in 1925, said that he would rather see industry with head held high and finance less proud. He was absolutely right, and that applies just as much now.

In particular we need a fundamental change in the tax culture in this country so that corporations and super-rich individuals no longer regard it as a duty-as we learned from Tesco in the press a few weeks ago-to minimise tax by any artificial devices that can be dreamed up to secure private gain. It is surely, by contrast, a responsibility that they make a fair contribution to the overall public gain of which they are a part.

There are several ways to achieve that. Obviously a key one is to seek to eliminate tax haven abuse. The non-governmental organisation Tax Justice Network calculates that the total assets now held by the wealthiest people in the world in tax havens amounts to a staggering $11.5 trillion, at a potential cost to world Governments in tax forgone of about $255 billion. To put that in context, the money lost to Governments worldwide is more than two and a half times total global aid flows last year.

Mr. Prisk: The right hon. Gentleman is talking about the amounts that high net-worth individuals have, which he says are lost to Government. How would he comment on the contributions of people such as Bill Gates, who give a huge proportion of their income to the very aid that he is trying to support? Governments do not have to do that on their own; individuals can contribute to it.

Mr. Meacher: That is fine. I know that some of the richest people such as Gates, Warren Buffett and, to some extent, Richard Branson have made substantial contributions, which is extraordinarily creditable, but that is not an argument for saying that very wealthy individuals should not pay their full, proper and due tax.

In the UK alone, the tax amnesty for those holding accounts with the offshore branches of some UK high street banks in the main Crown dependencies-I am thinking of Jersey, Guernsey and the Isle of Man-is expected by the Treasury to yield a recovery of about half a billion pounds in tax from just 60,000 people, or 0.1 per cent of the population, who admit to undeclared income in these places. That shows the sheer scale at present, and it is unacceptable.

I am not against amnesties; I understand why we have had one now, and I think it is succeeding. Instead of just having occasional amnesties, however, all UK dependencies and protectorates-particularly the Cayman Islands-should now be required to use the same standards of disclosure and accountability as the UK itself. The UK standard should also be tightened by requiring all UK-registered companies to report annually on all their overseas subsidiaries, including their revenues and how many people are employed. If we were to introduce that transparency, it would dramatically improve the prospect of fair and balanced tax collection, and I intend to table an amendment to the Finance Bill to that effect-if the Government do not do that first. [Interruption.] Yes, I think that that is unlikely, which is why some of us need to assist and nudge an arm or two.

There are several other ways of dealing more effectively with tax avoidance and evasion. We should look at the tax reliefs and allowances that accrue to those earning over £100,000 a year-the richest 1 per cent. of the population. One might ask: what is the justification for enhancing by means of tax reliefs an already enormous salary, when that will mean that others will have to pay more to compensate?

Mr. Love: I agree with many of my right hon. Friend’s points, although I must say that we ought not to set manufacturing and finance in competition with each other; both must flourish within our economy. How does he respond to the classic argument that is made against his case for proper taxation of the wealthy, which is that they are so mobile that they will simply move outside the jurisdiction of the UK authorities?

Mr. Meacher: I shall come on to that. [Interruption.] I know that many Members say that when they might not intend to do so, but I do intend to-in the brief time that I have left.

I was talking about how we might deal with offshoring, and I also wish to talk about the domicile rule. Frankly, it is indefensible. If it were abolished, that would recoup more than £4 billion in lost taxation. Abolition might not be the answer, but there should certainly be a considerable reduction in its application. As for so-called capital gains on all assets held for less than a year, they are clearly not capital gains but a form of income, and they should be treated as such and be subject to income tax. That would save about half a billion pounds in otherwise lost tax. Also, the tax authorities should make it absolutely clear that they are deadly serious. The UK should co-operate with other countries, particularly in Europe, to ensure that tax is paid where the taxable economic activity occurred. That would largely stop misallocation of profit to tax havens.

More complex tax avoidance should be tackled by enshrining in law the general principle that wherever an otherwise commercial transaction is added to any arrangement the sole or main purpose of which is to reduce tax liability, Her Majesty’s Revenue and Customs should disregard the artificial addition and tax the transaction accordingly. Counter-productively, HMRC is being run down by 25 per cent. in the five years to 2010. In order that corporations and super-rich individuals understand that tax avoidance does not pay, it should instead be built up substantially, as the Treasury calculates that each member of HMRC staff recovers 96 times their full cost of employment.

Artificial tax avoidance and tax evasion are a cancer on the body politic. Economically, this is the best time for decades to launch a systematic campaign to eradicate that, and I look to the Treasury to set it in place.

My del.icio.us bookmarks for March 21st

These are my links for March 21st:

• Comment is free: Money from thin air - James Robertson argues the case, convincingly

BIG TROUBLE ON TREASURE ISLAND

It was good to celebrate my 50th birthday this morning reading an excellent article in the Guardian with the above title. As the sub-title said:

Jersey’s status as a tax haven has made it one of the richest places on Earth. But there is a widening gulf between the millionaires of the financial sector and locals struggling with low wages and rising prices. As Jon Henley reports, the backlash is growing.

It’s a privilege to help those fighting this injustice.

The awareness of the criminality of Jersey and its ilk is also growing. As The Times reports today:

Britain should tighten controls on the gambling industry and monitor the activities of wealthy foreigners to combat money laundering, according to a report by the US State Department. The annual International Narcotics Control Strategy Report identified Britain as “a jurisdiction of primary concern” and said that despite improved anti-money-laundering laws and regulations, at least £15 billion of criminal profits is processed through Britain each year.

According to the US, Britain is a favourite place for money launderers, alongside Afghanistan, the Cayman Islands, Cyprus, Liechtenstein, Pakistan and the United Arab Emirates.

The report also names Guernsey, Jersey and the Isle of Man as money-laundering destinations.

They are.

Who are the Taxpayer’s Alliance?

The Guardian carried an article under this title this morning. The question is a good one. Especially as they are specifically contrasted with the Tax Justice Network, to whom I am an adviser.

The answer is raised in a media context: how do they get so much publicity. They claim the answer is:

“We are always available 24 hours a day,” says [chief executive] Elliott. “We put the work in so we get good coverage.”

Actually, I don’t buy that. Lot’s of people are available 24 hours a day and don’t get as much coverage. TJN, for start, even though we (unlike the TPA) actually try to provide considered analysis and real research on stories.

The reason why the TPA get coverage is much easier to explain. Take chairman Andrew Allum’s profile for a start. As he says:

He left the [Conservative] party in 2003, having lost faith that it represented his brand of free market, individualist and compassionate politics.

Put it another way: he moved further Right than the right wing of the Tories. He moved out of the political mainstream and into the Neo-Con, libertarian hinterlands. He gave up analysis at that time. He took up government bashing (by which I mean, all government, not just the government of the moment) and that covered his anti-tax agenda (I mean all tax, not particular tax).

And we have a media that supports this view; laps it up and feeds it as objective comment to the British public. Just look at the Sunday Times budget supplement yesterday, which featured on ’stealth taxes’ and actually quoted a women claiming she was questioning the value of her £16,000 a year job because she was going to suffer a £27 tax increase this coming year.

This is crass reporting. The story is complete rubbish. She simply won’t notice the difference. Her family as a whole will be £88 a year worse off (but I note increases in child allowance weren’t taken into account, so that probably overstates the case) but the media wanted to find an anti-tax story. The Tax Payer’s Alliance pedals them this sort of nonsensical yarn knowing that no-one will ever act on what they say. Which is precisely why the Tories said yesterday that there were no grounds for cutting taxes.

Unlike the TPA, the TJN works in the real world. We talk to real politicians, from the Conservatives, Lib Dems and across the Labour perspective. We do not deal outside the limits of credibility. But facing real issues makes it so much harder to get coverage.

But I’ll trade fewer press reports for credibility any day, and there is no one of any credibility in government or opposition in our parliament who takes the TPA seriously. Thankfully.