Tax haven UK: onward march!

Lord Oakeshott, the UK's former Liberal Democrat Treasury spokesman, on Her Majesty's Revenue & Customs (HMRC):

"Britain is fighting its financial deficit with one hand tied behind its back because HMRC is in such chaos."

This is about ongoing cuts to HMRC: in an era of deficits and austerity, it is astonishing that this approach is being pursued, with so little protest. Neutering the tax authorities is a devious and anti-democratic alternative to cutting tax rates, which are far more easily noticed (and frequently opposed) by local electorates - while multinationals, which spend a lot of money exploring such things, do notice. The result is, as Private Eye recently noted, that

Tax is for little, vulnerable people.

Now the Guardian has written on the weekend about a UK Treasury select committee report:

"Large-scale job cuts, a senior management out of touch with day-to-day issues and severe delays responding to queries left the future looking "bleak". The committee paints a picture of a department barely able to function, mainly as a result of cost savings and re-organisations imposed by the coalition and the last Labour government. HM Revenue & Customs has had to deal with real-terms cuts to its budget every year since its formation."

This follows many warnings from the past, such as this one:

"Morale inside Revenue & Customs (HMRC) is so low that government plans to tackle aggressive tax avoidance are in jeopardy, according to a report today by an influential group of MPs."

Multinational corporations have been working hard behind the scenes to weaken Britain's tax authorities, as part of the Onward March of Tax Haven UK. And for more on this, see numerous past reports from Private Eye, or this testimony in parliament from tax expert Richard Brooks recently, about recent corporate tax changes in the UK. Just take a look at the corporate capture of tax policy-making that he outlines:

These are self-evidently very generous moves that encourage tax haven activity in the face of global pronouncements against offshore activity in the wake of the recent financial crisis.

CFC [controlled foreign corporation] reform has been led by a "CFC Liaison Committee" comprising HMT and HMRC officials along with the tax directors of BP, AstraZeneca, International Power, RSA (Royal Sun Alliance) and HSBC. All stand to benefit substantially from relaxation of the CFC laws.

Reforms to be introduced in Finance Bill 2011, including the exemption for third country income described above, were developed by a working group comprising HMT and HMRC officials (four in total) plus tax directors from Anglo American plc, British American Tobacco plc, Xerox, IBM, Intercontinental Hotel Group plc, C&W plc, Rolls-Royce plc and Aviva plc. Again, all will benefit greatly from the changes developed by their group.

The same companies, plus others including Tesco, Diageo, Rio Tinto, Glaxosmithkline and many others are currently taking forward wider reforms under a further six working groups. [2] The group considering "monetary assets" includes the tax director of Vodafone, whose multi-billion pound tax avoidance using transactions covered by this very aspect of CFC law has been extensively reported by Private Eye.

The whole process has been overseen by a "tax and competitiveness group" comprising the finance or other directors of Vodafone Group plc, Diageo plc, RSA Insurance Group plc, GlaxoSmithKline plc, Rolls-Royce plc, General Electric Company, Ford Motor Company, Amey plc, Royal Dutch Shell plc plus the director of the business-funded Oxford University Centre for Business Taxation and the Director-General of the CBI. Again, the companies mentioned stand to gain significantly from the changes proposed.
. . .
Policy-makers are writing the rules in conjunction with the very vested interests that stand to gain most from their decisions."

And so it goes on.

Also, see this story about Murdoch, which we linked to recently, about corporate influence, and Christian Aid's response.

Update: see Tax Research on this same issue today.