Tax-Dodging is Symptom of a More Damaging Disease
Few stories get my blood boiling like tax evasion. It’s the section of the emotional Venn diagram where feelings of anger with politicians, helplessness about the poorest, envy about the richest and frustration with public services, all come together.
That is why, to me at least, the HSBC Swiss bank scandal matters. It shows up the unfairness of the way that HMRC operates and shines a spotlight on the open acceptance of a culture of tax avoidance amongst our political and business elites.
Fairness in the tax system means corporate taxes that make a fair contribution without stifling growth, and individual taxes that place the heaviest burden on those that can bear it most easily. The exact balance of the tax burden is a shifting yoke that see-saws on our shoulders as we make our way down the path of history. A major shift in the balance can cause uproar, exodus or destitution. We have a say in that balance through our democratic choices at election time, but having made those choices, evasion and avoidance must be fought at all levels equally.
HMRC are failing on that test. When average individuals fail to pay tax (often in my experience because of an error by HMRC) we get threatened, prosecuted, fined (or worse). When big corporations (eg Goldman Sachs or Vodafone) find ways around the system, they are either ignored or come to sweetheart deals. The threats and intimidation of individuals is often to chase down a couple of hundred pounds. The approval of avoidance schemes by big corporates costs the taxman billions. Tax avoidance deals between HMRC and big business are expensive and shameful. They should be illegal.
HSBC is a slightly different case, but it’s equally shameful. Here we seem to have a situation where the tax man has been told directly that a UK bank is openly offering tax avoidance schemes to its UK clients. The response from the tax man is to put his head in the sand, and focus on squeezing working families. Not only that, the leader of this bank that has deliberately encouraged clients to put assets beyond the reach of HMRC on an industrial scale is immediately ennobled and brought into government. The fact that Stephen Green has also become a Church of England minister along the way makes this story worthy of a nomination in the corporate cloud-cuckoo-land Oscars.
I do not think that HMRC is run or staffed by bad people. I do not think that Stephen Green or his political or business chums are inherently immoral.
But their ‘that’s just the way it is’ mentality creates a malaise that eats away at our society. It feeds a belief that there is one set of rules for the rich and powerful, and another for everyone else. It supports the tacit understanding that big business and influential individuals will get the breaks while the rest of us carry the can. It gives rise to the realisation that complacency and hypocrisy are comfortable shoes for so many of our officials and institutions to walk in.
Britain is perhaps not the worst country for this sort of corruption and it is not a new phenomenon. But the relative transparency of modern public life makes it a front page issue and something that drives deep resentment in Britain in 2015. We’ve had enough of hearing how cosy arrangements protect vested interests and how nepotism drives political decision-making.
Of course we should review HSBC’s schemes, as well as the activities of those who used it. We should get to the bottom of who knew what and whether political intrigue adds up to something more damaging. We should also staff, resource and challenge HMRC to take a firmer enforcement position on corporate and individual tax dodging. Our politicians should demand that European and Commonwealth partners do the same.
But we need to go further and address the political diseases that gnaw away at our democracy’s integrity.
We have an electoral system that supports 2 major parties and job-for-life politicians to be enticed into corporate influence. We have a party donations system that allows the rich and powerful to buy influence at the top tables of British public life. We have a House of Lords built on wealth and political loyalty rather than merit or electoral mandate. We have a revolving door between government and business that makes for opaque, suspicious deals in the private, rather than public interest.
All of these issues have been known about for years, if not decades. We need to act to reform our political system now. Through wholesale political reform we can make the UK a fairer society, and in doing so make it stronger, richer and better equipped to prosper in the future. Both Labour and the Conservatives have blocked political reform because it challenges their control of the system – use your vote in May to vote for a party that believes in political reform so we can set about updating our political systems for the 21st century.
Basic human instinct tells us that no-one will pay more tax than they have to. But while the super-rich have the ability to exert disproportionate influence on the law-makers and organs of enforcement to avoid tax, the rest of us will be left asking – why should I play by the rules when they don’t? That basic sentiment of ‘why should I do my bit’ has the potential to have profound negative consequences for our society and we should press for reform of our institutions to ensure we do everything we can to arrest it.
Tax avoidance erodes our public services, but the idea that the system is rotten does far greater long-term damage. Let’s keep this on the agenda do something about it in May.