To us, it's an obscure shift of tax law. To the City, it's the heist of the century
In David Cameron we have a leader whose job is to quietly legitimise a semi-criminal, money-laundering economy
- George Monbiot
- guardian.co.uk, Monday 7 February 2011 22.01 GMT
- Article history
'I would love to see tax reductions," David Cameron told the Sunday Telegraph at the weekend, "but when you're borrowing 11% of your GDP, it's not possible to make significant net tax cuts. It just isn't." Oh no? Then how come he's planning the biggest and crudest corporate tax cut in living memory?
If you've heard nothing of it, you're in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone – and are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d'etat is taking place.
Like the dismantling of the NHS and the sale of public forests, no one voted for this measure, as it wasn't in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century. The latest heist has been explained to me by the former tax inspector, now a Private Eye journalist, Richard Brooks and current senior tax staff who can't be named. Here's how it works.
At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.
Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks.
But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major western economy". By the time this government is done, we'll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: "What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy." He's doing just the opposite.
These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business that doesn't outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments.
So how did this happen? You don't have to look far to find out. Almost all the members of the seven committees the government set up "to provide strategic oversight of the development of corporate tax policy" are corporate executives. Among them are representatives of Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays.
I used to think of such processes as regulatory capture: government agencies being taken over by the companies they were supposed to restrain. But I've just read Nicholas Shaxson's Treasure Islands – perhaps the most important book published in the UK so far this year – and now I'm not so sure. Shaxson shows how the world's tax havens have not, as the OECD claims, been eliminated, but legitimised; how the City of London is itself a giant tax haven, which passes much of its business through its subsidiary havens in British dependencies, overseas territories and former colonies; how its operations mesh with and are often indistinguishable from the laundering of the proceeds of crime; and how the Corporation of the City of London in effect dictates to the government, while remaining exempt from democratic control. If Hosni Mubarak has passed his alleged $70bn through British banks, the Egyptians won't see a piastre of it.
Reading Treasure Islands, I have realised that injustice of the kind described in this column is no perversion of the system; it is the system. Tony Blair came to power after assuring the City of his benign intentions. He then deregulated it and cut its taxes. Cameron didn't have to assure it of anything: his party exists to turn its demands into public policy. Our ministers are not public servants. They work for the people who fund their parties, run the banks and own the newspapers, shielding them from their obligations to society, insulating them from democratic challenge.
Our political system protects and enriches a fantastically wealthy elite, much of whose money is, as a result of their interesting tax and transfer arrangements, in effect stolen from poorer countries, and poorer citizens of their own countries. Ours is a semi-criminal money-laundering economy, legitimised by the pomp of the lord mayor's show and multiple layers of defence in government. Politically irrelevant, economically invisible, the rest of us inhabit the margins of the system. Governments ensure that we are thrown enough scraps to keep us quiet, while the ultra-rich get on with the serious business of looting the global economy and crushing attempts to hold them to account.
And this government? It has learned the lesson that Thatcher never grasped. If you want to turn this country into another Mexico, where the ruling elite wallows in unimaginable, state-facilitated wealth while the rest can go to hell, you don't declare war on society, you don't lambast single mothers or refuse to apologise for Bloody Sunday. You assuage, reassure, conciliate, emote. Then you shaft us.
• A fully referenced version of this article can be found on George Monbiot's website
See also
6 Apr 2011
13 Apr 2011
17 Apr 2011
Wigan focused as Charles N'Zogbia sends Blackpool into relegation zone
18 Apr 2011
23 Mar 2011
17 Dec 2010
6 Dec 2010
23 Nov 2009
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Comments in chronological order (Total 1053 comments)
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Just remember, we're all in this together!
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I've had just about enough of these charlatans and their rampantly destructive agenda. Taking people for fools and shafting them is a dangerous game to play.
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Its the sheer dishonesty of this current mob that ticks me off.
I had some faint respect for Thatcher who sometimes meant what she said.
But this bunch of a**holes .....
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It's not often I agree with you on anything Mr Monbiot but the fact that this exemption only applies to the big boys suggests something extremely rotten about the whole business.
And, like you say, where was this in the manifesto?
I was delighted to see the back of the last government. I did not expect the new one to just assume executive power in every direction without any reference whatsoever to the platform on which it fought the election.
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This comment was removed by a moderator because it didn't abide by our community standards. Replies may also be deleted. For more detail see our FAQs.
Is there no electoral loophole to remove a government that so consistently talks bollocks?
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The Telegraph gets a clearer picture of facts from Cameron. 11% of GDP is borrowed.
And it's worth all this (re-answer afer 6 April)?
Deficist hysterics to make his book-keeping seem important. It isn't
But Tax Law changes of the type you outline make it make perfect sense.
And I thought it was just about giving a big chunk of £80,000,000,000 NHS-spend to their friends every-year.
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Don't worry George, with 50% income tax it isn't likely any of these guys will want to locate in the UK anyways....best of luck through with the rant.....
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In all serious with this current stampede back to the 1820's I keep expecting to see workhouses make a comeback into UK society.
Not that they will be called workhouses that's too honest.
Cameron will call them self sufficiency centres or some other managerspeak b***ocks.
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Is there no electoral loophole to remove a government that so consistently talks bollocks?
...................................................................................................................................
I think it's called a revolution.
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Thus our government complete the destruction of Britain and the impoverishment of the British people, begun in the 11th century by the Norman invaders, entrenched by the farce at Runnymeade, accelerated by the enclosures of the 17th and 18th centuries, endorsed by every government since 1979. The corporate raiders complete the task begun with the longboat and the axe, of transferring what little remains of our wealth to a foreign elite. Cameron is the heir of the Normans and Angevins, the Tudors and the Stuarts, and has as little allegience to our country. We must rise up and throw off the yoke of those who have oppressed us for a millenium, and now seek to strip us bare, to suck our blood. To them we are a resource to be exploited, something less than human. We need a bold and patriotic leader to overthrow the government, and to lead us into a new world of freedom.
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But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major western economy". By the time this government is done, we'll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: "What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy." He's doing just the opposite.
I wonder why anyone would reduce the rate of tax in an economy George?
Why the heck would anyone ever think of doing that?
You want to try running a business, before you get too carried away with the rates of corporate tax in this nation. Maybe you do run a business, and want to pay more tax. That's not a problem. Just send them more than they ask for. They will be delighted.
It may come as a surprise to you, but there are some things you cannot solve by re-distribution. This nation is desperately short of investment, and so far into debt it is drowning.
Without revenues, and investment, and job creation, it is never going to get out of this dreadful, debt-lined hole.
I hope that you are not planning to try to tax your way out of it.
Because that is never going to work. All that will happen is that were are all more equal, and further into the hole.
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Christ!
Any chance that the Guardian can stand this up and put it on the front page so it makes some public impression, rather than just being quietly ignored by the rest of the media?The way it's heading the only people who'll be paying tax are middle and low income employees on PAYE and that tax will only be spent on roads , policing and lucrative goveernment contracts for the rich.
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what shall we do then?
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Bauhaus;
What shall we do?
Never, ever vote tory again.
Instead we can vote for ....
I'll get my coat.
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These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates.
Not nearly as much as carbon trading caused energy price rises will. It's called globalisation and once upon a time you were against it George.
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George,
You're going to get the usual quota of swivel-eyed nutters abusing you for this, but:
It's true. Democracy is finished. We had a brief experiment with it that lasted 80 years or so, but the elite decided it was too much of a threat to them. We're about to enter a new Dark Age, and it's not going to pretty.
It grieves me to say it, but those camoflaged idiots creeping about in the bayous and preparing for an assault by big government may be on to something.
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SickNtired
Don't worry George, with 50% income tax it isn't likely any of these guys will want to locate in the UK anyways....best of luck through with the rant.....
If you had read the piece rather than just the headline you might understand that the changes apply to corporation tax rather than personal tax and will affect companies that are already based here but that have branches in other countries.
Best of luck, though with learning to read the article before posting.
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Treasure Island is descriptive but has few proposals as to what is to be done.
A rather more useful book might to read Robin Blackburn, Age Shock , how finance us failing us (2006).
This is much wider in its coverage of what is happening and has serious developed proposals for change.
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They're all in it together.
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Monbiot,
You're much closer to avoid doom with this - very well done - job than with all your previous work on global warming. Congrats.
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Never, ever vote tory again. Instead we can vote for ....
Nerdwin Miliband. Sorry, only joking, he's a Tory too.
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ramekins
Treasure Island is descriptive but has few proposals as to what is to be done.
What be the matter with mutiny, ramekins lad?
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Thats what I love about capitalism - it never stops evolving. And there's always an opportunity for an opportunist.
George has twigged that while global warming might have scientific validity, popular belief can founder on an occasional snowfall. On the other hand, conspiracy theories about capitalism are much more robust, and there is absolutely no need to understand anything at all.
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@strummered
A revolution? If only. Everyone's too busy watching frigging X Factor or somesuch rubbish to notice that the establishment has had our pants down since the dawn of time. In my lifetime, there's only 1 solution. Look after your own as best you can and stick it to the man at every opportunity.
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@Peason1..."I was delighted to see the back of the last government...".
Be careful what you wish for.....
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A fine article.
I have read Nicolas Shaxson's book also and would say it is one of the "must reads" for anyone who wants to understand the global economy.
I think we should petition for the removal of this government and then insist that the labour party does its rightful job.
Namely seriously taxing the banks and corporations and petitioning the rest of the world to wake up also, before we are all downtrodden by the new corporate Tsars.
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Great piece, George, but appalling to contemplate. If there isn't a popular revolt in England within the next year or so, the country is pretty much finished.
Cameron and his ancestors would quite happily have handed the keys to the UK over to the Germans in 1940 and told them - help yourself. We all know what that makes them...
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This must be the real reason for the "ring of steel" around the City. Or is that "ring of steal"?
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the Corporation of the City of London in effect dictates to the government, while remaining exempt from democratic control
The City of London Corporation is a shady instituation with a very peculiar history.
Even though it's a corporation, it also functions as a local authority, but one which is not just elected by residents but by businesses. Each business is assigned votes based on its number of employees.
Our democracy is not always what it seems.
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When the rich won't pay taxes. And the poor, increasingly find that they can't pay taxes.
The rapidly diminishing middle is left to pay, for everything.And they will urge that taxes be lowered by cutting services to the poor. (And incidentally to themselves.)
Cutting the NHS back to a barebones charity hospital operation may save vthe middle class some taxes but it will also drive them into buying expensive private insurance. This will cost a lot more than the taxes saved.
And the same is true of, for example, University Tuition Fees. Many middle class people, obsessed by the fantasy that poor people go to University, grow rich and laugh at the taxpayer for funding them, favour tuition fees. Then they have to pay them and this too makes them poor.
Let's cut to the chase: soon there will be a few very rich people and a vast mass of very poor people. Most of those currently in the middle will be among the poor.
The truth is that those who support the denial of decent living standards to others, generally end up sharing the fate of their victims.
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That's the way capitalism works. It is all about cherisihng capital, protecting capital, and celebrating capital. You can substitute for capitalism: wealth creators or oligarchs based on your current political leanings.
We have had this in the past. Before roughly 1945 the world was living in a capitalist "nirvana". Then we had a two-generation anomaly: people revolted (successfully for once), scared the wealth creators and/or wealth holders, and things were better for about two generations. Then the most stupid generation in human history matured - the Baby Boomers - and with a combination of toys, silly emotional propaganda, ennui, and some outright bribes, the wealth creators fought back and now they are about to enter a new era of capitalist nirvana. It is going to be fun, reliving history always is, especially since we are now well-fed, ignorant and distracted.
As I said before, it is not the assorted Thatchers, Reagans, Murdochs, or even Bliars, that we have to worry about. It is the stupid and bought intellectuals who can't distinguish between self-interest and human rights, who always cry over excesses of "revolutions", but shrug shoulders over excesses of current power, who would rather cry over underpriviledged in another hemisphere than see the misery they themselves are slowly imposing on their own children. Above all they just love to be bought and humored.
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If the liberals had any shred of principle, they'd walk away from this government now.
I do wish that other people would join these dots more. If you look at the people who bankrolled the Tories in the last election (and are prepared to bankroll them again), the major financiers were bankers who own banks that have branches in Switzerland. The Tories were always the political wing of the banking sector.
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No its for our own good George. Its for our own good. We just dont understand it right now. We arent able to comprehend such schemes as those put together by the wizards in the city.
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I've come to the conclusion that the government are in fact aliens. No human being could believe that this is the best policy for the greater good.
Where is Dr Who when you need him?
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Even the believers deny it and expect intelligent observation as in this piece be ridiculed.
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Is it really all just a big accident that the finance industry was deregulated to finally put us in the current situation we find ourselves in? Is this the way things just evolved?
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George, your articles are the best on here.
It all rests on the March marches if that changes nothing I will hunker down until the shit hits the fan so hard the fan can't ignore it.
What a dispiriting time to be young and English.
I blame our parents for not stopping the rot before it ate the floorboards from under us.
Unity is what we need today if your not super rich then get your feet on the street or at least some dinner table agitation
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@ qwertboi
The Telegraph gets a clearer picture of facts from Cameron. 11% of GDP is borrowed.
just to put 11% in context: the bankers were lending up to 5 times annual income as mortgages, (and "spreading the bets" by selling them to our pension funds etc. as if they were secure).
So one ninth or 11% of annual income justifies anything they want to abolish, five times or 500% of annual income was sensible lending.And the median UK borrowing expires in 2015, so that half of it does not start being repaid until after the next election. But they have chosen to pay it off in four years (ie whilst they are still in power to justify abolishing public services in the same time span.
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This is absolutely incredible. How have we let it get to this state of affairs? These people need to be exposed as the sneering thieves they are.
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Fantastic article, wil email acopy of it to my MP,This corporate elite and its political puppets are slowly but surely taking over a system we are all embedded in ,what do they care through their actions milions of people globally are being pushed back into poverty they own the governments, the banks ,the media and control the essentials of life,like food water and energy and will make us all pay as much they can get away with, they do not care about human beings, children or the planet ony profit and their warped ideals they insist we all must believe in.
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Richard Murphy on the 8% effective tax rate for large corporations: http://www.taxresearch.org.uk/Blog/2010/12/01/the-uks-8-corporation-tax/
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At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.
Is there a good reason, other than the deficit, why the UK government should impose on UK companies a tax on money not made in the UK?
Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms.
But is that a specific exclusion? Or is it simply because smaller firms don't make money overseas?
But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK.
That is indeed more worrying. But is is just a proposal - is there any reason to think this won't be changed before it gets put to parliament? If it isn't, it seems very unlikely it will get through both houses.
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The stupidest thing about these proposals is that companies will be allowed to pay no tax in the UK on the income of foreign branches and at the same time claim expenses on the upkeep of those branches against tax. It seems to me that a basic tenet of taxation is that if you claim expenses for tax purposes, then the relevant income should also be taxable.
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As an aside, this proposal was of course stated in the budget back in June last year, with detailed proposals (including draft legislation) being published in November.
Seems that it takes some time for news to filter down to Guardian hack-central..
Regarding the merits of the specific proposal, this is an eminently sensible move with the clear goals, inter alia, of:(i) bringing the treatment of branches in line with that of foreign subsidiaries, reducing the arbitrary corporate structure incentives inherent in CTA 2009, s.5;
(ii) moving the UK ever closer to a pure territorial corporate tax system (in line with the prevailing global trend), with the obvious objective of increasing the competitiveness of the foreign operations of domestic companies; and
(iii) of course limiting the risk of redomiciliation of UK resident companies to more commercially attractive climes.
All this is a good thing for the UK economy, and hence a good thing for the tax-consuming majority who live off people like me (the minority of productive tax-producers).However, I've learnt to expect that populist hacks and the economically clueless majority who inhabit CIF rarely seem to understand what is actually in their own long run interests...
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Beckovsky
Self interest and human rights. Are you suggesting that they are mutually exclusive?
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
Well those guys would have disagreed with you.
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@tybo
Your right of course, and I stand corrected, but ultimately the point still stands, these companies don't sit on the difference, they pay salaries, bonuses, dividends, buy equipment, all taxable events of course....Mr. Mobiot makes its sound as if it is a flow through, but ultimately the money finds its way into mr. and ms. smith and the government takes its pound of flesh....
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In David Cameron we have a leader whose job is to quietly legitimise a semi-criminal, money-laundering economy
I agree, it's crap, but just what David Cameron has been left after the 13 year reign by demented Gordon Brown.
I could see what was happening years ago, but unfortunately too many people in the media and government were content to look the other way and enjoy the fruits of a bubble that never seemed to burst (until it did, pricked by the American toxic mortgage business).
The Big Society, laudable though it may be, will just have to wait.
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Well the right wing lunatics seem to be out in force BTL tonight. Not one of them can, judging by their responses, actually read and comprehend what has been written.
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Sunday, 1 May 2011
To us, it's an obscure shift of tax law. To the City, it's the heist of the century | George Monbiot | Comment is free | The Guardian
via guardian.co.uk
