According to an entry in Wikipedia, a sovereign state is a nonphysical juridical entity of the international legal system that is represented by a centralised government that has supreme independent authority over a geographic area. It is also normally understood to be a state which is neither dependent on nor subject to any other power or state.
The only way a centralised government can be sure it has supreme independent authority over its geographic area is if it controls all laws that apply in that territory and it is controls the setting and collection of revenue through taxation.
In the last three posts on this blog, we have focused on an issue that demonstrates beyond any doubt that the United Kingdom is not independent. Laws to which British people are subject are made by a foreign entity outwith these shores. Control of the setting and collection of revenue is similarly determined by an overseas power. As such:
- the UK does not have legal sovereignty
- the UK does not have tax sovereignty
This is of fundamental importance to this country and its people.
The Public Accounts Committee scrutiny of the HMRC Annual Report and Accounts for 2012-13 have brought this essential issue to the fore, yet the far reaching implications of the absence of sovereignty in these areas are either not being understood by the media, or ignored by it. This is the most serious matter concerning governance in the UK today, yet no one, with the exception of a couple of bloggers, is trying to draw attention to it.
When Margaret Hodge asked HMRC why they have not chosen to litigate and test their powers, in respect of collecting tax based upon revenues and profits made within the UK’s jurisdiction by corporations such as Starbucks, Amazon and Google, the answer from HMRC should have been they they have already tested their powers in the Thin Cap Group Litigation – and lost the case in the European Court of Justice. Very recently indeed, in 2007.
HMRC lost the case because EU law prohibits restrictions on corporations moving capital between member states and, crucially it prohibits restrictions on corporations making payments between their component entities within the European Union. This basically means a company can make a huge profit within the UK’s jurisdiction but the UK cannot collect corporation tax on that profit if the corporation chooses to make transfer payments to a European ‘parent’ entity within the EU.
In such matters, as a result of being an EU member state, the UK has been rendered impotent. It is therefore not sovereign.
Many people have been greatly angered by what they see as corporations ‘not paying their fair share’, not least Margaret Hodge. But too few of their number understand that what the corporations are doing is legal and enshrined in EU law. The free movement of capital (a principle which was later extended to include payments) was one of the four fundamental freedoms of the common market. It is an EU matter.
This has shone a light on an issue far more serious than the actions of the corporations – namely the inability of member states to have tax sovereignty.
Yet this huge issue – tax tourism – with all its far reaching implications, is hiding in plain sight and attracting no attention from even a single media commentator. Not a single national paper or news broadcaster has explained this point to the public. The question is, why?
Politicians like Hodge can wring their hands, scream, shout and hissy fit until they faint. They are powerless. Their agencies, such as HMRC are hamstrung and unable to do anything. No amount of hearings or inquiries will change that.
The competence for taking money in taxes from corporations in the UK, that choose base their activities in another EU member state and choose to transfer money made in the UK to that base from the UK in the form of payments for royalties or rights etc, has been removed by European treaties. The UK has ceased to be sovereign. The only way this will change is if the UK withdraws from the EU.
Yet you can be certain all those corporate interests will be lining up as they are now, demanding the UK remains in the EU because it’s ‘good for business’. What has been outlined in this post is the reason why. National sovereignty and the will of the people don’t matter a jot to them, only achieving the largest profit possible by paying the lowest tax rate they can find.