To the neoliberals, the matter is starkly simple: taxation is a form of theft.

Taxation reduces the nation state's ability to compete in a global world - "Standortkonkurrenz" - and redistributive taxation saps the will to work.

There needs to be, as Karl Polanyi put it:

" ... fear of starvation with the worker, lure of profit with the employer ... "

The social state was founded to remove the fears of everyone without independent means, and to put legal restraints on enterprise.

Globalisation signalled a return to the 'virtues' of early nineteenth century Britain. [LF]

Thus the current vogue on the right for a flat tax, and the constant pressure on government from bodies like the CBI to lower corporation taxes.

The Blair-Brown regime tried to stear a middle course between these two positions, predictably satisfying neither.

Osborne has no such problem!

PricewaterhouseCoopers, the accountant, last week held a meeting with finance directors of private equity houses to help them work out how to get around the tax, introduced in this year's Budget.

Strategies to get around the tax include bringing forward payment dates for bonuses or dividends to pre-empt the introduction of the tax in April next year or deferring payments until after the general election.

Advent and Charterhouse, two City private equity firms, are planning to circumvent the new top rate tax by paying three years' worth of salaries and bonuses to top employees this year. Employees would then loan the salaries and bonuses back to the private equity houses for a pre-arranged rate of interest over three years ...

Telegraph  18 July 2009

GOOGLE, the internet giant with the motto “don’t be evil”, avoids paying more than £100m a year in UK tax despite pulling in annual revenues of more than £1.25 billion.

Even though the web search engine operates as Google UK Ltd in London, British firms which advertise with it pay their subscriptions to a subsidiary based in Ireland, where corporation tax is far lower than in the UK.

This structure, condemned this weekend as “unfair” and “unacceptable”, allowed Google legally to avoid paying £110m of UK tax in 2007, according to research by an expert on corporate tax avoidance ...

Sunday Times 19 April 2009

Google is accused of UK tax avoidance

LORD MYNERS, the minister in charge of the government’s assault on tax havens, has used a blind trust to conceal £250,000 of his own money in an offshore shelter.

Details of the secret holding have been obtained by The Sunday Times as G20 leaders gather in London pledging to stamp out tax abuses.

Myners transferred 500,000 of his own shares in the Ermitage hedge fund, based in Jersey, into a blind trust when he became a minister in October ...

In 2006 Myners backed the £40m acquisition of Ermitage. He was appointed chairman and had a 5% stake for which he paid £250,000.

The shares were held in his blind trust and it is believed they were quietly sold on his behalf by a private bank in the past few weeks. Ministers typically create blind trusts to avoid possible conflicts of interest over their financial affairs, but critics say they can be used as a means of concealment.

Hedge funds operating in Jersey can avoid paying corporate tax on profits and are not required to comply with the tougher regulations of the City of London. They manage more than £40 billion of funds.

Myners resigned from his business roles when he was appointed City minister. These included his chairmanship of the Guardian Media Group and his role at Ermitage.

Documents filed with the Jersey Financial Services Commission reveal that he still had a stake in the hedge fund as recently as January. His stake was the fifth largest in the company, which in 2006 was managing more than £1.5 billion of investments ...

Sunday Times 29 March 2009

Lord Myners under pressure over Sir Fred Goodwin's pension deal

Lord Myners suffers new blow with discovery of offshore holdings

Lord Myners ‘knew about massive pension payout for disgraced banker’

• Bank of America and BB&T repay loans early

• Project Knight meant to generate £100m next year

The banks' three loans, totalling $17bn, were made in 2007 and designed to generate tax benefits to Barclays over three years equivalent to approximately $270m a year, at the expense of the UK exchequer. The US counterparty banks were not avoiding US taxes but received a fee in kind from Barclays - in the form of cheap loans - in return for their involvement.

Under the elaborate scheme drawn up by Michael Keeley, an executive at Barclays' secretive Structured Capital Markets division, a series of Cayman Islands and Luxembourg entities and partnerships were created. Three sets of triple entities were used, named Alymere, Claudas and Pelleas, according to accounts held in Luxembourg and at Companies House.

Tax experts say these devices enabled Barclays to accumulate profits virtually tax-free in Luxembourg, through a process known as "double dipping". The sums of capital involved needed to be large, in order to generate worthwhile amounts of 30% tax relief on the loan interest, typically running at about 5% ...

Guardian 27 March 2009

Lib Dem spokesman dodges gag order

• Judge upholds ban on publishing bank's documents
• Insider says tax avoidance central to firm's business

Further detailed allegations about tax avoidance schemes set up by Barclays Bank emerged tonight from whistleblowers who said the bank made close to £1bn profit a year from a series of elaborate deals.

The schemes are similar to those detailed in documents published by the Guardian this week which have been the centre of a three-day hearing at the high court, and are the subject of a gagging order.

The internal Barclays memos were leaked by a mole to the Liberal Democrats. The new allegations reiterate claims that the bank's main purpose in entering into these schemes was to make profit from tax avoidance through an intricate circuit of offshore Cayman Islands and Luxembourg companies. The profits are said to be enormous and the deals so complex that HM Revenue & Customs (HMRC) struggles to unravel them ...

Guardian 20 March 2009

Judge upholds Barclays' attempt to gag Guardian

The seven secret Barclays tax documents

Roger the Dodger - £40m king of tax

Macho poker bets

The Streisand effect

The bank, the judge, the secret

Barclays' millions help to prop up Mugabe

As world leaders finally get around to doing something about international tax evasion, a strange counter argument is forming: tax is a red herring, say the sceptics; better to focus first on sorting out the banking crisis rather than get bogged down in an "irrelevance" ...

While it is true there were many other causes of the financial crisis - too much debt, being the most obvious - it is wrong to pretend that systemic tax avoidance of the sort practiced on a huge scale by our banks is unconnected with their eventual demise. Here are five reasons the two issues should be seen as intimately related.

1) Offshore = out of mind

The offshore vehicles used by banks to hide their activities from the taxman also served to obscure their extent from investors and regulators.

Granite, the Jersey-based trust operated by Northern Rock, is exhibit A.

Tax havens are also breeding grounds for corruption.

2) Pushing rules to the limit is infectious

As the FSA points out there is no point in having principles-based regulation when you are dealing with people with no principles.

Similarly when you encourage bankers to ignore the spirit of tax law and only heed the letter, you encourage them to look for loopholes and shortcuts everywhere.

3) Everyone must pay their fair share

We are all going to have to pay more taxes to clean up this mess, but public support for government bank bail-outs could be fatally undermined if voters believe that only little people pay taxes.

The sight of the super-rich swanning about in tax havens should be of more concern to the CBI than anything else right now - without public support, banking is toast.

4) Complexity confuses everyone

One reason why the world of finance became so convoluted was to stay one step ahead of the taxman. The "double dips" and other tax-efficient structures described here ultimately baffled everyone: including their creators. Just ask AIG.

5) Avoidance fuels unsustainable growth expectations

Hiding the true source of your wealth can give your investors a dangerous false sense of security. General Electric, for example, grew lending for years by keeping its tax rate shrinking, until suddenly it lost its credit rating.

Far from being "dead money", structured finance vehicles also require large amounts of borrowing to sustain: when the debt market dries up, they are the first to go under.

Guardian 20 March 2009

BARCLAYS, the high street bank, is alleged to be making about £1 billion a year from an international web of financial schemes designed to avoid paying tax in the UK and abroad.

The claim has been made by a whistle-blower who passed internal Barclays documents to Vince Cable, the deputy leader of the Liberal Democrats.

The documents — seen by The Sunday Times — detail a trail of transactions allegedly created to legally avoid tax by a team within Barclays Capital, a subsidiary of the bank.

One 2007 scheme, named Project Valiha, was allegedly designed to help Barclays save £99m in UK tax by embarking on a rapid series of transactions across just three days and involving a Swiss bank and companies in the Cayman Islands and Luxembourg ...

Sunday Times 15 March 2009

Offshore havens that refuse to hand over information on tax dodgers face an unprecedented campaign of economic sanctions by the world's most powerful countries, which may be agreed at the G20 summit in London next month.

The campaign could see Britain targeting some of its own overseas territories including the Cayman Islands and the British Virgin Islands, where British banks and corporations use scores of subsidiaries to avoid tax ...

... George Osborne, made a statement saying: "While Gordon Brown claims he will deal with offshore tax avoidance, he is increasing the government's stake in banks that, like RBS, have offshore subsidiaries".The Guardian disclosed in its recent Tax Gap series, that Lloyds was "making loans subsidised by the British exchequer", according to revenue allegations in a current tax avoidance tribunal case over transactions with US insurance giant AIG and Bank of America involving hundreds of millions of pounds. The bank continues to refuse to explain the purpose of other large loans, totalling £4bn, many routed through the Caymans. It claims all its tax-linked activities are legitimate.

Following the G20 preparatory summit in Berlin last week, officials are preparing a new blacklist of uncooperative havens. Other leading centres of secretive offshore activity including Liechtenstein and Panama are among more than 30 nations that have failed to sign agreements to hand over information about corporations and individuals who take advantage of their secrecy and their low taxes ...

The G20 is believed to be drawing up its blacklist from three overlapping groups of havens: those which still have no double taxation conventions, which allow nations to swap information on taxpayers in each other's jurisdiction; those which have refused to accept the idea of new Tax Information Exchange Agreements (TIEAs), which allow one nation to require another to dig out extra information on a suspect; and those which agreed in principle to TIEAs but have failed to sign them.

Guardian 02 March 2009

Tax havens cost the UK at least £4 billion a year

The UK is losing at least £4bn a year through residents holding money in offshore tax havens, research claims.

Jersey, Guernsey and the Isle of Man were among popular spots for the wealthy to hold savings, the TUC said.

EU rules allow UK residents to declare interest earned overseas or to have 15% withheld from interest in the country where the account is held.

Separately, a report says MPs are calling for a review into the use of havens by taxpayer-backed banks.

Under the EU rules, three-quarters of the 15% in tax on interest that is withheld offshore is eventually paid to the UK government.

But this means that the effective amount collected by HM Revenue and Customs was 11.25% - rather than the 40% which would typically be paid, the TUC says ...

BBC NEWS 01 March 2009

TUC

TUC calls on banks to come clean

Accountancy Age has been digging about the prospect of another UK tax amnesty. The last only really affected the activities of the UK’s five biggest banks - Barclays, Lloyds, HBOS (as was), HSBC and RBS. It successfully showed the massive support they provide to those who evade their taxes using the Crown Dependencies - for which they deny any responsibility and which they fought long and hard to hide on behalf of those who were breaching UK law - but it also left out vast numbers using other banks and more specialist organisations ...

Robert Kirkby, technical director at Jersey Finance, a government association for banks trading on the island, said HMRC could not be ‘too aggressive with a second amnesty’. Or in other words “please be kind on our poor criminal clients” ...

Tax Research UK 26 February 2009

The chancellor, Alistair Darling, yesterday promised further action to stop corporate tax abuse when he was challenged by MPs over allegations of "cynical tax avoidance schemes" by Lloyds bank. ...

David Taylor, the Labour MP for North West Leicestershire, raised the Lloyds allegations at Commons question time, saying HMRC was investigating the bank for "double dipping and tax avoidance via Cayman Island companies".

He asked the chancellor to explain "what access the government had to Lloyds books before pumping in billions of pounds of public money and whether any conditions, such as an end to all tax avoidance activity, were attached to our cash being used to save a bank".

Darling said that as the matter was before the courts, there was a limit to what he could say. Ministers did not normally comment on the circumstances of any corporate or individual taxpayer ...

Lloyds was accused at a tribunal of using a subsidiary of Hill Samuel Investments to pour hundreds of millions into transatlantic tax avoidance schemes.

Huge loans to the financial products section of US insurer AIG and to Bank of America were allegedly disguised as commercial investments for tax purposes.

As a result, the money from the deals was treated differently for tax purposes on each side of the Atlantic. HMRC alleges that millions of pounds of income, received in the UK as distributions from US investments, was granted tax relief on the basis that US tax had already been paid.

But in the US, where the cash was treated as interest payments on a debt, it was also granted tax relief. This type of practice is known as "double dipping" ...

Guardian 13 February 2009

The tax gap

THE financier who has been appointed to protect taxpayers’ money in Britain’s bailed-out banks is a former trustee of a secretive Liechtenstein bank accused of facilitating massive tax evasion.

Glen Moreno, who chairs the powerful body that oversees the government’s £37 billion shareholding in the banks, was paid hundreds of thousands of pounds during a nine-year association with Liechtenstein Global Trust (LGT), a private bank based in the tax haven.

The disclosures are an embarrassment for Gordon Brown, who last week criticised offshore tax havens and called for international action to stamp out tax evasion.

“Advising the rich to exploit tax loopholes is unpatriotic,” the prime minister has said in the past. The bank was strongly criticised by name by President Barack Obama when he was a senator.

LGT, owned by the Liechtenstein royal family, became the subject of international scandal last year when a former employee blew the whistle on its dubious practices.

Moreno quit as a trustee last April, two months after it was first reported that financial details of thousands of clients had been passed to the German tax authorities by Heinrich Kieber, a bank technician.

HM Revenue & Customs was reported to have paid £100,000 for the information and said last night that it was investigating about 150 British clients of LGT.

The bank was condemned in a report last summer by a committee of the US Senate, whose members included Obama. “Ordinary Americans pick up the slack for tax cheats who hide assets in offshore tax havens, often with the help of foreign banks like . . . LGT,” Obama said ...

The Times 08 February 2009

Bail-out chief under fire

Where the missing billions go

UK Financial Investments Ltd

The latest ploy by big businesses anxious to avoid UK tax, is to claim that they have changed residence to low-tax Ireland. But when the Guardian went in search of new company headquarters on the Liffey, we found there sometimes seemed to be a touch of blarney involved in the claims ...

In order to escape the British tax net, companies who claim they have shifted to Ireland are required to show that their firm is not "centrally managed and controlled" in the UK. This does not seem to be regarded as an onerous hurdle to overcome, particularly as the companies can continue to be listed on the London Stock Exchange while claiming foreign status.

Tax advisers tell companies that the legal requirements may be satisfied merely by flying to Dublin airport to hold board meetings. They advise companies also to keep some staff in Ireland, designated as helping the board reach strategic decisions or managing its tax affairs.

Migrating companies do not even need to submit to Irish company law. Firms such as WPP have technically re-incorporated themselves as offshore entities in Jersey, in the Channel islands, as part of their move. Tax experts say this use of a tax haven saves the cost of stamp duty.

Dublin's heavily-advertised 12.5% low rate of corporation tax is not the real reason for company flight, taxation experts say. Subsidiaries which remain in the UK in any case continue to be taxed in Britain.

What is crucial, especially for firms which hold "intellectual property" such as patents or brands offshore, is that they can take advantage of Ireland's lack of rules on taxing the profits of multinationals' offshore operations ...

Guardian 10 February 2009

The tax gap

Tax and the bonus culture

Britain has a rubbish infrastructure. The road network gets clogged up and the rail network is a relic of the 19th century. We know this because business bangs on incessantly about the money it is losing through congestion and delay. UK plc is not up to the job, it says.

Britain has a substandard workforce. Too many people lack the skills necessary for them to be as productive as employees in other parts of the world. We know this because employers' organisations such as the CBI constantly complain about systemic deficiencies in literacy and numeracy, together with failings in so-called soft skills such as punctuality and attitude. UK plc needs to sharpen up its act to meet cut-throat international competition ...

To listen to corporate lobbying groups, you would imagine that companies are more than happy to do their bit but are forced into offshore arrangements by the demands of a punitive tax regime. Britain does not have an onerous corporation tax regime, especially once account is taken of the labyrinth of allowances that companies can claim.

Treasury estimates suggest that corporation tax receipts amounted to £45bn of the £545bn harvested by HM Revenue & Customs last year. That's just over 8% of the tax take, slightly lower than a decade ago. Of course, corporation tax is not the only levy on companies; among other things they pay business rates, stamp duty land tax and fuel duties. Again, these are passed on to individuals, who bear the brunt of revenue raising in the UK. Income tax and national insurance contributions are expected to bring in £250bn this year - more than five times as much as business pays in corporation tax on its profits.

One justification for corporate tax avoidance raised by some of those commenting on last week's series of Guardian articles was that business gets such terrible value for money that it is somehow entitled to set up complex offshore arrangements to reduce its bills.

This is not an argument that an individual could use: when social security claimants are hauled up before the beak for failing to tell the authorities that they have found a job, it is not an excuse to say that the government was squandering tax revenues on Trident, the war in Afghanistan, the NHS computerisation project, ID cards or any of the other brilliant ideas ministers have had for shovelling money into a black hole.

No, the real reason that business avoids paying tax is because it can. Many of the best brains in Britain are employed picking holes in the UK's tax code, so much so that a 2006 study cited tax planning as one of the hidden manifestations of British innovation (Nesta: The Innovation Gap, October 2006; www.nesta.org.uk). What's more, they do an extremely effective job; some estimates of the tax saved in 2005 are in excess of £13bn, almost a third of the corporation tax take ...

Guardian 09 February 2009

The poor take the biggest hit

Boots

The Tax Gap

Tax Research UK

Barclays Bank is said by some industry insiders to be Britain's most active legal tax avoider.

It rewards players in the tax game staggeringly well ...

... The bank managed to obtain £30m of UK tax allowances with a sale and leaseback arrangement over a pipeline. It split the proceeds with the original owners, the Irish gas board. The price paid for the bank's so-called investment appeared to go round in an offshore circle, ending up back at Barclays via the Isle of Man and Jersey. Barclays won a lengthy legal battle when in 2003 law lords finally ruled the scheme permissible.

Another circular scheme was sold to US bulldozer manufacturer Caterpillar. The firm transferred ownership of £165m worth of plant to a UK subsidiary, Caterpillar International Leasing LLC, which then sold it to a Barclays company called BMBF (No.24) Ltd. This Barclays "special purpose vehicle" immediately leased the kit back to the UK Caterpillar company, which itself then rented it back to original owner Caterpillar Inc.

At all times the plant remained at Caterpillar's Illinois base, while most of the price that Barclays paid over was deposited back with Barclays in Bermuda. The only purpose was to generate UK tax allowances worth around £50m. That scheme did fail, in the appeal court ...

Another reported Barclays tax scheme involved selling its customers payment protection insurance via low-tax Ireland.

The policies, from Barclays Insurance (Dublin) Ltd and Barclays Assurance (Dublin) Ltd, generated profits up to £200m a year, taxed at just 10% ...

Guardian 06 February 2009

The top poacher

Three FTSE100 companies have quietly "offshored" legal ownership of their valuable trademarks to low-tax locations, the Guardian's tax gap investigation has found. Two drug firms, GlaxoSmithKline, and AstraZeneca, both headquartered in London, have moved title to their drug brands to Puerto Rico in the Caribbean. The Anglo-Dutch oil giant Shell, although it is still a British plc operating under UK company law, has shifted its trademarks to Switzerland and its main tax residence to the Netherlands.

These are three of Britain's most successful corporations, continuing to generate huge profits and returns for their shareholders despite the global downturn. AstraZeneca has been one of the best performing shares on the FTSE over the last year, seeing its share price go from around £21.50 to around £28.60. At the same time, its market capitalisation has gone up by more than £10bn from £31.3bn to £41.4bn. Glaxo has also been one of the few companies to see its share price go up as the economic storm rages - from around £11 a year ago to around £12.50 now.

Last week Shell revealed that its profits in the final three months of 2008 were down by more than a quarter on the previous year. The oil giant still made more than £25,000 a minute in profits and is forecasted to achieve record earnings this year of £21.5bn. ...

All three enjoy the benefits of being a UK plc - access to capital, enhanced reputation, proper regulation and political stability. Yet they have moved the rights to their intellectual property to tax havens. This means they can reduce their UK-based profits and hence their British tax bills by paying royalties to the subsidiary in the tax haven for use of the trademarks ...

Guardian 03 February 2009

This crisis must spur us to take on the tax avoiders

The tax gap

British taxpayers are being left to plug a multibillion-pound hole in the public finances as hundreds of the country's biggest companies increasingly employ complex and secretive tax arrangements to limit the amount they hand over to the exchequer.

An extensive Guardian investigationhas examined the accounts of the UK's biggest companies - many of them household names - and discovered a series of sophisticated tax strategies which, critics say, amount to an almost unstoppable tide of perfectly legal corporate tax avoidance.

The veil of confidentiality that covers these tax avoidance schemes is so difficult to penetrate that nobody knows exactly how much tax goes missing each year. But HM Revenue & Customs estimated that the size of the tax gap could be anything between £3.7bn and £13bn. The Commons public accounts committee put it at a possible £8.5bn and the TUC said £12bn ...

Guardian 02 February 2009

Going Dutch ... outward domestication

Diageo plc ... has been paying very little UK corporation tax ...

Despite average annual profits of almost £2bn over the last decade, its accounts disclose a mere £43m a year in average UK corporation tax charges. This is little more than 2% of its profits ...

Guardian 02 February 2009

What is the tax gap?

The hunt for funds allegedly cheated out of investors by Bernard Madoff, who faces fraud charges in New York, has turned to offshore tax havens where investigators believe he may have salted away hundreds of millions of dollars. ...

Sources close to the investigation said forensic accountants examining Madoff's books believed he had regularly sent large sums of money to offshore accounts in the Caribbean and Europe.

"There are accounts at New York Mellon Bank that we have been looking at that appear to have sent and received money from offshore locations," a senior source said.

Tracking down the money investors entrusted to Madoff is likely to be one of the longest and most complicated financial investigations on record ...

... a New York judge ruled that Madoff's investors would receive no more than $100,000 in cash compensation, no matter how much they lost.

The Observer 28 December 2008

If you want to know why Britain has never completed the process of decolonisation, look at two lists side by side.

One is the official register of tax havens, compiled by the OECD. The other is the list of British overseas territories and crown dependencies.

Over a quarter of the world's tax havens are British property. More than half of Britain's colonial territories and dependencies are tax havens.

Strip out Antarctica, the military bases and the scarcely habited rocks and atolls and, of the 11 remaining properties, only the Falkland Islands is not a recognised haven.

The obvious conclusion is that Britain retains these colonies for one purpose: to help banks, corporations and the ultra-rich to avoid tax. ...

The website Shelter Offshore, which helps people to avoid their obligations to society, has just published its list of the world's "top 5 tax havens". Jersey, Guernsey and the Isle of Man come first.

"These highly respectable British offshore tax havens," the site tells us, "can be very attractive indeed", offering "superior levels of investor privacy".

Privacy is the polite word for the secrecy and obstruction that helped to bring down the world's financial systems ...

George Monbiot 16 December 2008

... a hedge fund run by Bernard Madoff, a former Chairman of NASDAQ is nothing more than a fraud: a $50 billion Ponzi scheme where the supposed dividend returns to investors were simply the new cash injected by new investors ...

... [the ]issue is how this happened and the answer is plain: lax regulation and a lack of transparency (whether onshore or offshore, and I have not yet proven where Madoff was) allows this.

Boris Johnson called for loosened regulation in London yesterday. This is why we can’t afford it. This is why he’s mad to propose it ...

Tax Research UK 14 December 2008