GONGS AND TAXES

No doubt much to the irritation of David Cameron and Ed Milibland tax evasion is back in the news – this time in relation to Take That singer Gary Barlow. At the end of the day it is a matter of semantics and legality when it comes to the differences between tax evasion from tax avoidance, one is a criminal act and one is permitted under the law.  

It is a matter of public record that the PM is against aggressive tax avoidance schemes. He has also been pretty forthright in stating that tax evasion is illegal, and that people can be prosecuted for that, and people can go to prison.

It is also a matter of public record that the Con Dem government ill-advised and perhaps ideologically driven public sector spending cuts have seriously cut staffing levels in HM revenue and Customs. The PM interestingly enough was pretty firm when it came to rejecting calls for particular individuals are stripped of public honours for wrong doing. If you started stripping individuals of titles and honours for wrong doings heaven knows where you might end up even the possibility of party donors ending up embarrassed not to mention devaluing legitimate honours awarded to deserving recipients.

Previously various Westminster governments have been a little half-hearted when it comes to clamping down on tax avoidance. The current PM may have slagged off celebrities, for using a tax avoidance scheme in Jersey. Yet he has seemed to be acutely reluctant to deal the tax havens that happen to be UK Crown Dependent territories. 

Most reasonable people accept that there is a real need to deal on a global basis with the problem of off-shore companies and those individuals who are actively engaged in tax avoidance, tax evasion and / or money laundering. It’s all a little embarrassing as the problem is that the UK is at the heart of the problem and has chosen not to regulate its own crown dependencies let alone the periodically iffy if not criminal goings on in the City. 

The scale of the on-going off-shore tax avoidance problem may leave you breathless. The Cayman Islands were home to some 12,000 corporations yet have a resident population of 50,000. They were home to around 70% of the planets hedge funds (as of June 2012). The British Virgin Islands with a population of some 22,000 people just happens to be home to some 823,502 registered companies.

General Electric who paid no tax in 2010, made a $14.2 billion dollar profit. Barclay's had 181 subsidiaries (as of June 2012) registered in the Cayman Islands and paid little UK tax on its worldwide profits. News Corp managed to base 152 subsidiaries in tax havens across the planet (according to the US Government) and yet managed to pay no UK corporation tax between 1998 and 1999.

US President Obama was 100% right to suggest that the governments of the world should jointly tackle the issue of tax evasion and tax havens. By tackling the tax havens, the tax avoidance and the questionable dealings of the derivative traders, hedge funds and the off balance sheet trading then we might go so way towards dealing with the consequences of the worldwide financial crash. Yet that nice Mr Cameron and the other 18 millionaires in the cabinet have pretty much stalled when it comes to closing the tax loopholes.

The BVI has incorporated more than a million such offshore entities since it began marketing itself worldwide in the 1980s. Company owners' true identities are never revealed. Even the island's official financial regulators normally have no idea who is behind them. The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries, claiming that the tax-free offshore companies provide legitimate privacy.