UK and US hypocrisy on tax avoidance - it's OK for us, but not for you

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.