On Wednesday 27th October a handful of people, organised by a group called UK Uncut, occupied Vodafone’s flagship store on Oxford Street. A few days later on October 30th a few more people joined them and occupied stores in London, Brighton, Glasgow, York, Birmingham and elsewhere. Alright, quite a few people joined them, and 10% of the company’s UK stores were forced to close. There are now plans for a national day of action on tax avoidance on December 4th, to follow the November 24th demonstrations against the cuts.
The protests were initially prompted by reports in Private Eye about the decision by HMRC ‘to let Vodafone off a £6 billion tax bill’ (in the words of the firebrands who run the Daily Mail‘s This Is Money website). A former head of the HMRC was quoted by Private Eye calling the decision as ‘an unbelievable cave-in’. There’s an update on the story in the most recent Private Eye that warns of the danger that an ‘alternative dispute resolution’ system will keep ‘tax avoidance cases out of the courts and away from public view’:
Immune to scrutiny, the taxation of the largest corporate tax avoiders becomes a private matter to be decided among friendly mandarins, beancounters and captains of industry.
Faced with the protests and a series of reports on the deal, Vodafone told Mobile News Online that ‘the idea we had a bill waived is not the case. It is incorrect to suggest there was ever an outstanding tax bill of £6 billion. That was never the case.’ A spokesman for HMRC insisted that the £6 billion figure was an ‘urban myth’. According to PR Week, in a poll 58% of those asked didn’t buy the urban myth line.
The Vodafone case illustrates many of the problems with Britain’s tax regime – the extensive use of offshore subsidiaries and the movement of personnel between government agencies, large companies, and accountancy firms that design schemes to avoid tax. But the money Vodafone managed to keep is only a small fraction of the total that transnational companies, wealthy individuals and criminals keep from the hands of the taxman.
Richard Murphy of the Tax Justice Network estimates that tax avoidance and tax evasion cost the exchequer around £95 billion every year. He also thinks that there is another £26 billion in unpaid or late-paid tax to be clawed back. By way of comparison, Murphy points out that total government borrowing in 2009/2010 came to £161.9 billion. In other words, strict enforcement of the existing tax laws would pay for just over 70% of the annual deficit.
Some sensible steps to raise taxes on the rich would ensure that the much-discussed deficit could be shrunk yet further, even in the midst of a recession. Indeed, given that the shift of income and assets to the top 2% of the population is now a major impediment to global economic activity, there can be no serious objection to rolling back the gains made by the super-rich in the years since 1980. We’ve tried trickle down. It doesn’t work. Only massive redistribution and state investment can prevent the current crisis from turning into something really nasty.
Now here’s a funny thing. On Saturday 13th November the Guardian reported that:
A government crackdown on tax evasion in overseas havens is expected to raise £10bn in this parliament, far more than previous forecasts. The unexpected windfall follows negotiations between national governments and the British tax authorities, Treasury officials disclosed yesterday.
The Treasury had only budgeted to raise £1bn across the parliament, mainly from an agreement with Liechtenstein. But George Osborne, the chancellor, is now expecting to raise £2bn to £3bn from secret bank accounts in the mini-state alone.
A journalist at Private Eye reports the deal between Vodafone and HMRC … People start demonstrating at Vodafone stores just after the government has announced plans to cut spend to tackle the deficit … The government announces a tenfold increase in the amount of tax it expects to secure in deals with offshore jurisdictions.
I am not saying that A caused B caused C.
A caused B, more or less. And C happened after B. We can’t say much more than that for sure. But those who demonstrated against Vodafone can take heart from the fact that they acted and and the government has suddenly found £9 billion it didn’t expect to find. Those who are wondering what good it does to demonstrate should join in on November 24th and on December 4th to find out. If a few hundred people doing the right thing can rustle up £9 billion*, imagine what a few hundred thousand might achieve.
The £9 billion that the government has suddenly found may well be used to bail out the Irish banks, to which RBS in particular lent so recklessly during the credit boom. But if the government actually wants to get rid of the deficit, and isn’t simply hellbent on securing the permanent triumph of the investing classes, it could do so by enforcing the law and securing the extra tax it needs to cover the costs of a recession caused by the collapse of the private system of credit. At the moment the rich are buying government bonds with money they should really be paying in tax. When central banks are conjuring money out of thin air, it must surely be clear that the financial system is a political creation and that it can be reformed by political action.
*Alright, alright, can precede the rustling up of £9 billion.