Anneliese Dodds MEP

The South East's Voice in Europe

Tax avoidance: getting the numbers right

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When it comes to taxation, the numbers are all wrong.  Everywhere you look expecting to find a low number, you see a high one.

 And where you think a number should be small, it turns out to be huge.

There should not have been, for example, many (indeed, any) people helped by HSBC to evade taxes they owed to the UK.  And yet we now know that there were over a thousand such people.  Given that staggering figure, you would at least HMRC - who have known about the practice for nearly five years - to have prosecuted a fair few of them by now.  But no, this time the number is underwhelming: a solitary one.

Or, instead of the numbers of people involved in these practices, we could choose to look at the money itself.  Perhaps the rate of tax being paid by some of the world's largest multinational companies, with profits in the tens of billions every year.  If not high exactly, that should at least be around the same level as the tax paid by smaller companies, right?  Wrong.  While small businesses across the South East of England dutifully pay the 20% corporation tax that they owe, their international rivals just up sticks to Luxembourg and lower that rate to almost zero.  How is it possible to compete on that kind of playing field?

One more number.  Across the European Union - a union of 28 developed countries, who are supposed to be global leaders in things like setting tax rates and then collecting taxes properly - the figure for the amount of tax lost every year to the secretive practices of evasion and aggressive tax avoidance isn't just surprisingly big.  It's eye-wateringly huge: one trillion euros lost, every single year.  That's almost too big to contemplate.  Perhaps it is better to break it down a little: it's €2,000 a year for every man, woman and child in Europe.

At a time when public services are being cut to the bone, this lost tax revenue isn't just unfortunate; it's deeply immoral.  That's why the Labour party, both in the UK and in Europe, are committed to changing things - to turning those numbers around.

This week Ed Miliband promised that a Labour government elected this year would makes its first Finance Bill a 'Tax Dodging Bill', closing loopholes that allow for legal but unethical tax avoidance, and imposing proper penalties on those who are caught.  This was a tangible, meaningful promise - as distinct from David Cameron's rhetoric on tax matters, which simply hasn't been followed up with action (there's another one of those surprising numbers: in the time the Conservatives have been in office, the tax gap in the UK has actually risen by £3 billion).

But we know that, in a world where it is all too easy for companies to move to the country where the tax rate best suits them, we also need action at the international level.  That's why Labour MEPs have also made tackling tax avoidance and evasion our priority.  In the wake of last year's Lux Leaks scandal, and now the revelations about HSBC, the European Parliament is committed to taking legislative action so that these kind of practices cannot happen in future.

In particular, Labour in Europe is calling for two key things: fully public country-by-country reporting for businesses in all sectors, and public access to a central register of beneficial ownership.

Predictably, a number of vested interests will howl in response to this and claim that it is burdensome and unfair.  But just think for a moment about what those two things actually mean: that companies should say, aloud, where they make their money and where they pay their tax; and that countries should say, so that everyone can hear, who actually owns the companies that are registered in their territory.  Put like that, it doesn't seem so unreasonable.

It's like the numbers again.  These kinds of actions might seem small.  But the difference they make could be enormous.

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