An Electrified Fence

Back on 14 November, I wrote of Ed Balls’ decision to support a specific penalties regime for the GAAR:

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Buried in the small print of the Autumn Statement Green Book is a sign that the Government agrees:

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I explained back in November how such a measure might operate here and set out the conceptual case for it here.

It must be very pleasing to the Shadow Treasury team to see clear signs that they’re starting to set the agenda.

The Google Tax and Political Contortionism

The politicisation of tax is a particular bugbear of mine. It’s no easy task balancing the competing demands of fostering growth, funding critical public services and guarding against the rapacity of those unwilling to focus on anything beyond their post-tax return. And yet politicians – and lobbyists – of all hues seem willing to topple this hard struck balance for ideological gain. As though it, none of it, really matters.

A good recent example that rightly enraged the left was the Tories’ abuse of an excellent idea – the enhancing of public understanding of Government finances – for a ideological push of Battleship Potemkin proportions. I speak, for those struggling with a seasonal hangover, of personal tax statements.

But tax is, apparently and uniquely, an arena in which John 8:7 (the one about the sinners and the stones) doesn’t apply.

In the Autumn Statement, the Tories took a bold step. Recognising the overwhelming moral – and business – case for ensuring domestic businesses could play on a level field with their multi-national competitors, George Osborne announced a “diverted profits tax”.

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Now is not the moment to speculate on how the government will achieve this, a measure which stands to raise around £350m per annum. There will be time for that next week, when the detail is announced. But what we can, safely, say now is that it is a radical measure; not hitherto seriously contemplated as even possible; and one which meets an overwhelming moral and business need.

Now look, and see, the politics.

There’s a cosy narrative on the left around tax avoidance: that avoidance is something the Tories tacitly encourage and that Labour, armed only with the simple sword of fairness and the trusty shield of moral authority, will end once and for all. Like most defining political narratives, routinely repeated at festive seasons to a congregation of the party faithful, its association with the truth is purely coincidental.

But this narrative, although it might bind together the faithful, also has consequences. It causes us collectively to close our minds to the technical difficulty involved in making good tax policy. It makes us less effective in Opposition (on which more to follow on Monday) and – which matters more – it makes us less effective in Government.

Those who work in tax and in the media know this to be true. They know it. And they know its damaging consequences. And yet they burnish the narrative. Because, of the twin sins of acknowledging the left might have something to learn on tax and of being economical with the truth, it is the first sin that they hold to be the greater.

Rather than acknowledge that the Google Tax might – depending on the detail, might – meet the compelling commercial and moral case identified above; rather than commend the ambition to tackle an issue dear to the public’s heart; rather than recognise that the BEPS project (on even the most optimistic view) is both years off and imperfect; rather even than waiting for the detail, we eagerly commit the latter sin for fear that our silence will be mistaken for the former.

Let me point some fingers:

  • The Tax Justice Network, which has long campaigned for multinationals to be brought fiscally to book, asks only whether the diverted profits tax is ‘Jumping the Gun’?
  • The Guardian which retains, fool that I am, a seemingly endless capacity to disappoint on tax, asserts (quite preposterously) that the diverted profits tax “doesn’t add up to a radical reform”
  • Even Richard Murphy, a man in whose energy and courage there is inspiration to be found, and who has long campaigned for multinationals to pay their share, has found himself unable, quite, to welcome the concept of this radical step.

To you I say, the public expects better.

Postscript

Richard Murphy, a man who will not suffer a nut to go uncracked, has written at length about this blog post here. There’s some interesting debate in the comments section with such luminaries as Howard Reed and Michael O’Connor. It’s in the comments section that Richard states what he says is his real objection:

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That we should not act for fear of undermining or pre-empting the BEPS project is a surprising statement given that (as Richard has asserted elsewhere):

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None of this, I have to say, causes me to revise the view I expressed originally that the reason the left-leaning fiscal commentariat had turned against the diverted profits tax (which will yield £350m per annum – not as Richard and others have incorrectly asserted £200m) was less to do with the technical detail of the tax and more to do with the political hue of the person who proposed it.  My own position remains as stated above – I’d like to see the detail but, in principle, it looks bold, radical and is to be commended.