Posts Tagged 'Tax Tourism'

Tax sovereignty – ducking and diving

On the day that Alex Cameron QC became the first barrister to be recorded and filmed in an English law court, giving an eloquent and gently earnest display before the Court of Appeal in an effort to secure a reduced sentence for his counterfeiting client, Kevin Fisher, Alex’s brother and Prime Minister David Cameron, gave an equally eloquent if rather more earnest display at the summit of the Open Government Partnership on the subject of tax avoidance and tax evasion.

Ultimately, despite their lofty positions, neither Cameron demonstrated sufficient grasp of the law and relied upon arguments that are completely flawed in the hope people would be taken in by them.

Alex failed to convince the Appellate bench that seven years for his client’s role in what is thought to be the largest ever plot to make fake pound coins in the UK, was unduly harsh and the appeal was thrown out.  David?  Well, let’s pick up Richard’s summary…

What Mr Cameron cannot do, of course, is admit that he has no strategy whatsoever “to keep corporate taxes coming in”. He cannot admit to the essence of this paper on the Thin Cap Group Litigation, a case which makes it very clear that the EU’s three freedoms – capital, establishment and services – prevent any action on the part of national governments to prevent corporates offshoring their tax liabilities.

The government cannot possibly admit that the losses of such huge sums lost to the taxman are attributable to EU treaty law. Apart from anything else, it would destroy Mr Cameron’s carefully fabricated claims about the benefits of EU membership.

Perhaps the truth of it is that both Camerons understand the law very well indeed.  But both of them, in their roles, deployed a mixture of smoke and mirrors, distraction and misdirection in an effort to conceal the reality of the situations from the judges and the British people respectively.

The Camerons, in their separate roles, are simply ducking and diving in a way that would put Del Boy and Rodney to shame.  What we have are an extremely wealthy and privileged version of the Trotters, in wigs, gowns and sharp suits.

In very calculated fashion, David Cameron is trying to confuse people, by linking tax avoidance, which is perfectly legal and acceptable, and tax evasion, which is not.  By appearing to clamp down on evasion, and further linking it to ‘money laundering’, he is trying to convince us that he getting to grips with public concerns.

But what has been concerning the public is tax avoidance, thanks largely to the demonisation efforts of various parliamentarians and media entities.  They see money being earned by huge corporates.  They see the revenues exceeding the costs.  Then they see little or no corporation tax being paid on the profits made here, because the corporate is structured to pay royalties and levies to another part of the company based elsewhere in the EU – where only then are profits taxed, by that nation’s authorities, with those tax receipts going into that nation’s revenues rather than ours.

The reality is, as part of the European project’s objectives of eroding borders and creating a de facto single state, several freedoms were enshrined.  These stop nation states from interfering with a company setting up entities anywhere in today’s EU, moving its money around the EU as it sees fit, and making payments (such as royalities and charges) between its various branches within the EU.

But on this reality, on this explanation as to why Amazon, Google, Starbucks etc, can make large profit on their activities in the UK without the UK Exchequer being able to tax it, David Cameron is doggedly, relentlessly and utterly silent.  It is the truth that dare not speak its name.  It destroys most of his argument about the economic benefits of EU membership – which are used as justification for accepting the erosion of sovereignty, the erosion of what little democracy we had, and submission to the will of unelected and unaccountable foreign structures and bureaucrats that make our national parliament and local government nothing more than an executive of the EU machine.

Multinational corporations may benefit, but it does little for the UK taxpayer.  That isn’t something that plays well with ordinary people, who are expected to bear all the pain and sacrifices that have to be made to ensure the corporations and their political friends can enjoy the fruits of regulation they make in their own interest.  That’s an admission Cameron will never make.

Tax sovereignty, tax tourism, national impotence and the European dimension

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.

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