One thing that you can’t have failed to
notice in recent years is the increasing rhetoric regarding the morality of
offshore centres and tax avoidance. The
days when tax evasion was bad, but tax avoidance was perfectly acceptable, seem
to be a distant memory. President Obama,
Carl Levin and David Cameron have all been amongst the most vociferous critics,
promising to stamp down on the offshore industry and the consequent tax “leakage”.
There couldn’t be just a teensy weensy
bit of hypocrisy in all the political bluster could there?
Representative Devin Nunes, a
California Republican, last week put forward proposals for a “business
consumption tax” to replace corporation tax. The detail of the proposals is
irrelevant for this article (although it makes an interesting read for anyone
who is so inclined), but what is interesting for these purposes is Nunes’s
comment in support of his radical reform proposals:
“Both U.S. and foreign companies would have more reason to
invest here....This would make the
U.S. the largest tax haven in human history.”
Bloomberg reported that it had come across
two objections to Nunes’s idea. The first is that it is simply too ambitious to
be politically viable; the second is that the proposal would cost the federal
government a lot of revenue if the new business consumption tax was set as low
as Nunes was suggesting. But nowhere was there a suggestion that
anyone was saying that the US shouldn’t do it because it would be morally
offensive to attract foreign companies to the US simply because of an
attractive tax regime.
And of course for decades the USA – or at
least the State of Delaware - has already been one of the largest tax havens in
the world. It’s funny how that seems to
have escaped the politicans’ notice when pointing fingers at Cayman or Bermuda.
Of course, it’s not just the Americans
that are at it. Our own Prime Minister
has promised to use his political clout to clamp down on tax avoidance
opportunities. He removed LVCR from the
Channel Islands in a politically motivated move which had little to do with
protecting UK tax revenues, and more to do with being seem to “crack down” on
tax havens. At the same time, when France hiked its own tax rates, he was
encouraging French citizens to hop across the Channel and move to London, to
take advantage of the UK’s very fiscally attractive non-dom tax regime, saying
that they would be welcomed with “open arms”.
Surely, following its own rhetoric, the UK government should discourage
them from trying to avoid their moral responsibility to pay French tax?
Having a political viewpoint on
taxation is fine. I accept that there
are politicians, such as Hollande and Merkel, who believe that a high taxation
model is right and necessary, and that there should be strict measures to
prevent tax avoidance. I don’t
necessarily agree with them, but at least they have principles and stick to them.
The UK and the US, on the other hand,
castigate lots of small countries for being “parasites” and attracting business
and people on the basis of unusually low tax rates, whilst harbouring ambitions
to do exactly the same themselves (and indeed, already doing it to a very
significant degree). It seems that tax
avoidance is only immoral if facilitated outside of their own countries. This position is little better than bullying
of small countries by big ones. To dress
it up as morally motivated is a disgraceful deceit.
